European Commission backs down on EU ETS and agrees to 'stop the clock' on international aviation emissions
EU Climate Action Commissioner Hedegaard "stops the clock"
Mon 12 Nov 2012 – EU Climate Commissioner Connie Hedegaard announced this morning the EU will suspend enforcement of the EU Emissions Trading Scheme (EU ETS) to airlines flying to and from Europe in order to allow ICAO to continue its progress towards a global emissions reduction scheme. The EU ETS will continue to apply to intra-EU traffic so European carriers will still be required to monitor, report and verify their CO2 emissions on flights within the EU, and surrender the required allowances by 30 April 2013. However, Hedegaard made clear that the suspension of the scheme applying to international flights would automatically be lifted in a year’s time if ICAO failed to deliver an agreement on “meaningful international action” over aviation emissions. The move comes after what the EU sees as significant progress at Friday’s meeting of ICAO’s governing Council, which agreed to set up a High-level group of 15 senior government representatives to provide guidance on policy issues to the expert group currently working on market-based measure (MBM) options and an implementation framework.
The EU has acted to give the ICAO process an opportunity to find a global solution “in a positive atmosphere” by “stopping the clock” on applying the EU ETS to international flights to and from Europe.
Commenting on what she described as “very good news” from the Council meeting, she added: “Finally we have a chance to get an international regulation on emissions from aviation. This is a long sought for opportunity that we must use. This is progress, but actually to get there, a lot of tough negotiations lie ahead.
“But let me be very clear: if this exercise does not deliver – and I hope it does – then needless to say we are back to where we are today with the EU ETS. Automatically.”
Further details on the fine print of the Commission’s intentions are to be provided in a technical briefing tomorrow afternoon (Tuesday) due to be presented by Jos Delbeke, the Commission’s Director General for Climate Action. The Commission will also have to reach a co-decision with EU member states and the European Parliament on its proposals.
In conjunction with EU states, the Commission has been working hard behind the scenes to reach a compromise with international opponents of the EU’s decision and it would appear unlikely Friday’s Council meeting alone was cause for the European volte-face. Both houses of the US Congress are on the point of agreeing anti-EU ETS legislation and China and India have refused their airlines’ compliance with the scheme. Many non-EU countries were unhappy to be negotiating at ICAO with an EU gun to their heads, although there still remains the threat of reinstatement in the case of failure.
However, the EU believes its tough stance has been vindicated and driven progress at ICAO. “Now it seems that because of some countries’ dislike of our scheme, many countries are prepared to move in ICAO, and even move towards an MBM at global level,” said Hedegaard today.
At Friday’s Council meeting, the 36 member states agreed that applying an MBM to international aviation emissions was technically feasible and also agreed to convene a High-level group because, an ICAO spokesman told GreenAir on Friday, the expert groups working on the issue had encountered several issues that require policy-level resolution in order to meaningfully continue their work. The group is expected to be nominated this week and will be composed of around 15 senior government officials from countries selected to ensure geographic representation and taking into account their respective levels of international aviation activity.
“ICAO is still progressing its work and related processes on the basis of the Resolutions set forth in its 37th Assembly [in 2010], which amongst other items required development of an MBM framework for the 38th Assembly’s [next September/October] consideration, as well as exploration of the feasibility of a global MBM scheme in order to provide the 38th Assembly with a progress report in that area,” added the spokesman. “The framework is on course to be agreed upon by the end of the June 2013 Council Session, and the global MBM scheme analysis continues to progress.”
According to the European Commission, the Council also agreed that the three MBM options under consideration – mandatory offsetting, mandatory offsetting with a revenue-raising mechanism and a global emissions trading scheme – would have to be reduced to one.
Reaction to the EU ETS suspension from the aviation industry has been largely positive, although in Europe the larger legacy carriers will be more encouraged than regional or low-fare airlines with the outcome.
“Commissioner Connie Hedegaard’s announcement that she has ‘stopped the clock’ on the imposition of the EU ETS on flights to and from non-EU countries represents a significant step in the right direction and creates an opportunity for the international community. The Commission’s pragmatic decision clearly recognises the progress that has been made towards a global solution for managing aviation’s carbon emissions by ICAO,” said Tony Tyler, IATA’s Director General and CEO.
“The flexibility shown by the European Commission demonstrates that the ICAO process is working, and we look forward to seeing all parties working together to present positive proposals to the ICAO Assembly in September 2013.”
Athar Husain Khan, acting Secretary General of the Association of European Airlines (AEA), which represents scheduled network carriers, commented: “We are pleased that the Commission has listened to the airlines’ point of view. As international tensions over the issue have escalated, European airlines have been facing the very real prospect of discrimination and retaliation in our most important global markets. Indeed, some AEA members have already encountered operational obstacles with regard to certain countries.
“European airlines will still be required to buy ETS credits for their flights within the EU. Since these are such a tiny proportion of worldwide CO2, it shows the inability of a purely regional scheme to have a meaningful impact on what is a global issue.”
AEA said it hoped the EU suspension would stimulate action within ICAO to come up with concrete progress towards a global approach by its 2013 Assembly. “In their opposition to EU ETS, countries such as the USA, Russia, China and India have repeatedly stated that the issue should be dealt with in ICAO. Now they have the chance to show that they mean it,” added Husain Khan.
Simon Buck, Chief Executive of the British Air Transport Association said: “Details of precisely what has been agreed between the Commission and Member States are as yet sketchy ahead of the technical briefing but UK airlines have always argued for a global approach to tackling the impact of aircraft emissions on climate change. We would therefore welcome any progress on this made at international level through ICAO.”
However, cautioned Buck, any part suspension of the EU ETS must not result in different rules applying to different airlines dependent on the routes they operate. “There is a potential for competitive distortion between airlines with this action which could be damaging,” he said.
With the EU ETS still applying on intra-EU routes, European regional carriers are unenthusiastic about the change.
“We’ve consistently argued that suspending the scheme while negotiations at ICAO take place makes a lot of sense,” Simon McNamara, Deputy Director General of the European Regions Airline Association (ERA), told GreenAir. “However, creating a two-tier, intra-EU system is our greatest fear. Because it would only include a relatively small number of flights, there is little environmental credibility and it merely adds costs and complexity for our members. There should have been a moratorium on the whole scheme.”
Airbus, which has seen some orders for its aircraft being held back by China in retaliation over the inclusion of its airlines in the EU ETS, welcomed the suspension and thanked both ICAO and the European Commission for their leadership.
Said Airbus CEO Fabrice Brégier: “Last week’s ICAO Council brings the aviation industry one step closer to a coordinated, globally-acceptable approach to better-manage civil aviation emissions. The positive cooperation between ICAO and the European Commission provides the international community with a real chance to make progress on a worldwide agreement on aviation CO2 emissions, and to prepare a sustainable future for international aviation.”
Reaction so far from the United States has been lukewarm. Reports today suggest that despite the EU ETS suspension, the House of Representatives will go ahead, possibly tomorrow (Tuesday) with a vote on the bill that could pave the way for the US to prohibit its aircraft operators complying with the EU scheme regardless of the suspension. As the bill has already been passed by the Senate, it would then require the President’s signature as a final formality.
Senator John Thune, who co-sponsored the Senate version of the bill, said today he was grateful for the delay in implementation of the EU ETS to US carriers but would be happier if it was abandoned completely.
“While I am pleased the EU has temporarily suspended its efforts to unilaterally impose a tax on our airlines flying over US and international airspace, the EU’s announcement does not rule out future efforts to tax foreign carriers,” he said in a statement. “Further, the EU’s announcement still does not recognise that its system is illegal and that a global solution, not just one deemed acceptable by the EU, must be the path forward.”
The US Air Line Pilots Association was equally unimpressed with the EU move. “Although this is definitely a step in the right direction, we remain deeply concerned with the unilateral nature of the EU ETS and its disregard for the sovereignty of non-EU nations,” said its president, Capt Lee Moak. “This temporary delay in no way changes ALPA’s position that the House of Representatives should quickly vote to approve the Thune-McCaskill bill.
“ICAO is and remains the proper and most appropriate venue to address the issue of aircraft emissions worldwide. To have one player determine the rules of the game for everyone cannot and will not provide solutions to the real problems our industry faces.”
At the time of going to press, Airlines for America, which has fought a long and hard campaign against the inclusion of its member airlines in the EU ETS, has yet to respond.
NGOs, on the other hand, believe the deferral by the Commission is a bigger concession than was necessary and more than commensurate with the “limited” progress made at Friday’s ICAO Council meeting.
“Opponents of the inclusion of international flights in the EU ETS have always said that a global solution under ICAO is the way to go. Now it is time for them to stop blaming the EU for blocking a worldwide approach and put their money where their mouth is,” said Bill Hemmings, Programme Manager for international transport at Brussels-based Transport & Environment. “The EU has stopped its clock, but the clock for ICAO and the climate is still ticking. The Commission, with today’s decision, has moved further than was necessary given the little progress made so far at ICAO level. There is no excuse for inaction left.”
Tim Johnson, Director of Aviation Environment Federation and who represents NGOs at ICAO, said: “The Commission’s plan still has to be agreed by member states and the European Parliament. Given the huge majority of MEPs that voted in favour of the legislation, we would expect the Parliament to confirm the importance of ICAO delivering a global MBM over the next 12 months.”
Under the co-decision procedure, MEPs and EU ministers will have to vote on a revision to the EU ETS directive before it can be officially adopted. Although there may be many MEPs uneasy with the suspension of the scheme’s application to international flights without an international agreement, EU states are likely to see the move more favourably.
In a statement, UK Energy and Climate Change Secretary Ed Davey said: “The UK welcomes the progress made on Friday in ICAO and fully supports the establishment of a High-level group. We hope that ICAO is able to build upon the current momentum to deliver a successful and ambitious outcome at the General Assembly.
“We welcome the Commission’s proposed approach to ‘stop the clock’. It is right that ICAO is given more time to make progress on reaching a global deal on aviation emissions.
“We look forward to seeing a formal legislative proposal emerge from the Commission. Once we receive more detail, we will engage constructively to help secure a positive outcome as soon as possible.”
The decision by the Commission has ramifications for the UK’s own climate policy objectives as the UK government is due to announce before the end of the December whether it will include international aviation emissions in its legally-binding carbon budgets.
Today’s Commission announcement throws up a number of crucial issues that have impacts not only for airlines and aircraft operators but also for the carbon markets. EU states will now no longer require allowances to be surrendered in April 2013 for 2012 flight emissions to and from the EU. However, many airlines – both inside and outside Europe – will have made commitments to purchase aviation allowances to cover their 2012 shortfall that are no longer needed, and which may well lose their value. Monitoring and reporting obligations have also been deferred for such flights but if the EU decides in a year’s time to reinstate the EU ETS, it will have lost important verified data for 2012. The reaction by an already shaky carbon market to the loss of a major portion of business from the airline sector is also a concern.
As yet, there is no clear definition of what the EU bottom line is as far as a “meaningful” international agreement at ICAO must look like, and whether a scheme adopted by ICAO member states would be legally binding and equivalent in ambition in terms of emissions reductions as the EU’s, as required by its legislation.
The Association of Asia Pacific Airlines (AAPA) has given a “cautious welcome” to the suspension, claiming the move was signalled last week, prior to the ICAO Council meeting, at the AAPA Assembly of Presidents meeting in Kuala Lumpur on November 9.
“In making this long overdue move the EU has finally bowed to the inevitable, in effect acknowledging that it cannot unilaterally impose the scheme on non-EU airlines without the consent of other governments,” said AAPA Director General Andrew Herdman. “Temporarily suspending the scheme is obviously a positive gesture by the EU, but may not go far enough. The implied threat of an automatic snapback in a year’s time means that the EU will still be seen by some as negotiating with a gun on the table.”
The alternative to a coherent global policy framework on aviation emissions reached through ICAO would be a disastrous patchwork of overlapping national schemes and punitive taxes, said Herdman.
“However, we must recognise that in line with the wider debate on climate policy, this is an inherently political process, and one in which the diverse interests of countries large and small, rich and poor, need to be reconciled,” he added. “The announcement by the ICAO Council of the establishment of a High-level group is a positive step towards addressing, and hopefully resolving, these difficult issues.”
Europe’s regional and charter carriers, whose flights will largely still be covered by the remaining intra-EU ETS scheme have expressed their dismay over yesterday’s announcement, which they called an unfair solution. While recognising the need for a moratorium to allow ICAO time to find a global solution, by implementing a two-tier scheme where intra EU operators are still obliged to fully implement the law, the European Commission will continue to impose cost and complexity on intra-EU operations with little or no overall environment benefit, said the ERA (European Regions Airline Association) and IACA (International Air Carrier Association) in a joint statement.
“Since the beginning of the legislative procedure that led to the adoption of the EU ETS, ERA and IACA have been supportive of the EU ETS scheme providing it applied to all airlines. By introducing a two-tier system the Commission has created a compromise that unfairly penalises many European carriers operating intra-EU flights and their passengers. ERA and IACA call on the EU Member States and the Parliament to extend the moratorium to all flights,” said Mike Ambrose, ERA Director General ERA, and Sylviane Lust, IACA Director General.