British business calls for a global cap-and-trade scheme to help limit carbon emissions from international aviation
Fri 23 July 2010 – The CBI, the UK’s leading business organization, says a global cap-and-trade system is the best way for the world’s aviation industry to meet its climate obligations. It calls on member states to start laying the groundwork for establishing such a scheme at the International Civil Aviation Organization’s triennial general assembly in late September. In a new report, ‘Green skies ahead, creating a low-carbon aviation industry’, the CBI also voices concern over the new British government’s proposals to change Air Passenger Duty to a per-plane duty which, it maintains, would be ineffective, damage competitiveness and deliver little or no environmental benefit. The British Air Transport Association (BATA), the trade body representing UK-registered airlines welcomed the report’s findings.
The report argues that aviation plays a vital role in the UK and global economy but the industry’s future success depends on adapting to a low-carbon future. It believes cap-and-trade can reconcile growth with emissions targets and a global scheme must therefore be established.
The aviation industry has experienced strong growth in recent decades, it says, opening up “a whole new frontier of opportunity that has enabled worldwide markets to become more integrated, competitive and productive.” It acknowledges, however, that the industry has been at the heart of public debate about climate change in recent years primarily because it is a growing source of greenhouse gas emissions.
In 2008, UK aviation GHG emissions were 113% higher compared to 1990 levels although the share of overall emissions remained relatively low, accounting for just 5.5% of the UK’s total.
“While it could be argued that this makes the focus on aviation in the climate change debate disproportionate, the implications of continued growth across the sector means that a sober assessment of aviation’s role in a transition to a low-carbon economy is required,” says the report.
The CBI reiterates its support for the UK government’s target that by 2050 there should be no growth in total UK aviation emissions from 2005 levels (37.5mtCO2). However, it believes that any national duty or tax on aviation will fail to cost effectively incentivize emission reductions, while instead creating “significant economic costs and competition disparities.” As such, the CBI believes both the current UK APD and the potential change to a per-plane duty are flawed regulatory instruments, providing no certainty about what the actual level of reduction will be achieved.
For international industries, such as aviation, the CBI says cap-and-trade schemes are particularly effective for establishing a fair and certain regulatory framework free from the competitive distortions of national taxes or duties. While supporting aviation’s inclusion in the EU Emissions Trading Scheme as “an important step forward”, the report says it is an imperfect carbon regulating mechanism as there is scope for both carbon and economic leakage.
“The goal for the industry must be a global cap-and-trade scheme covering all aviation emissions, which avoids the competitive distortions and risk of carbon leakage: entry of aviation into the EU ETS should be a precursor,” the report concludes, noting that 2010 is an important year for making progress towards such a scheme with the ICAO general assembly taking place in September.
UK airline trade association BATA said it welcomed the report’s recognition that a global problem is best addressed with a global solution, such as a cap-and-trade scheme, to replace the UK government’s tax on aviation. BATA said its members recognized that airlines should meet the assessed cost of their environmental impact but pointed to figures published in 2008 by the UK’s Department for Transport that demonstrated APD more than covered the industry’s full climate costs, including an allowance for non-carbon effects.
“Despite this assessment, the Government plans to further increase APD rates in November 2010,” it complains.
BATA also called for APD or any replacement tax to be phased out from 2012 when aviation enters the EU ETS. “Imposing a unilateral UK national tax on air travel when the industry will be paying for its emissions through the ETS at a European level will simply be taxing passengers and the industry twice.”