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Europe Backs Down with International ETS Suspension

The business aviation lobby broadly welcomed the European Commission’s sudden suspension of the application of its controversial emissions trading scheme (ETS) for flights in and out of the European Union (EU). The move seems to head off the immediate threat of a trade war with major powers such as the U.S., China, Russia, India and Japan but, significantly, ETS will still apply to intra-EU flights, regardless of whether or not the operators involved are based in the EU.

On November 12, EC climate change commissioner Connie Hedegaard said that the application of ETS for flights in and out of the 27 EU member states will be suspended for about 11 months pending an anticipated agreement on a multilateral global alternative program being agreed by the ICAO Assembly in September/October next year. She said that “stopping the clock” on ETS implementation had been triggered by a November 9 ICAO Council decision to push for an alternative market-based mechanism to be applied by all of its member states worldwide.

However, the commissioner warned that if ICAO fails to achieve “an international deal” the application of ETS for movements to and from the EU will be “automatically” reinstated next fall. She also emphasized that ETS will still apply for all intra-EU flights, regardless of whether or not an operator is based in the EU. Officially, the major policy reversal still has to be approved by all EU member states, but Hedegaard made it clear that she had consulted with them before making the high-profile announcement.

U.S. Ban on ETS Compliance in Effect

The U.S. House of Representatives passed legislation last month that forbids U.S. aircraft operators from cooperating with the European Union on its plan to levy a carbon tax on all aircraft arriving into, departing from or flying over the 27 EU member states. The bill now goes to President Obama for his signature.

This latest move by the House actually rubber-stamps Senate bill S. 1956, which was approved by unanimous consent in the Senate in September and by voice vote in the House on November 13. The House had previously passed its own version, which was melded with the Senate bill.

The measure directs the Secretary of Transportation to prohibit an operator of a U.S. civil aircraft from participating in any emissions trading scheme (ETS) unilaterally established by the European Union if the Secretary determines such prohibition to be in the public interest.

Sen. John Thune (R-S.D.), who sponsored the Senate bill, said he was glad the EU requirement has been delayed, but he expressed concerns that it could be revived later. He said he would have been happier if legislators had abandoned it entirely.

“While I am pleased the EU has temporarily suspended its efforts to unilaterally impose a tax on our airlines flying over U.S. and international airspace, the EU’s announcement does not rule out future efforts to tax foreign carriers,” Thune said in a statement. “Further, the EU’s announcement still does not recognize that its system is illegal and that a global solution, not just one deemed acceptable by the EU, must be the path forward.”

Rep. Bill Shuster (R-Pa.), who has been mentioned to succeed Rep. John Mica (R-Fla.) as chairman of the House Transportation and Infrastructure Committee, said the bipartisan “European Union Emissions Trading Scheme Prohibition Act” also instructs U.S. officials to ensure that U.S. aviation operators are not penalized by any unilaterally imposed EU emissions trading schemes.

“The EU emissions trading scheme is nothing more than a cash grab that proposes taxes on the U.S. aviation industry and the American flying public,” said Shuster. “The current plan lacks transparency or any clear requirement that fees collected by EU countries would be used for reducing emissions. While EU leaders have temporarily backed off implementing their emissions tax proposal, this legislation ensures U.S. operators will not at any point participate in the proposed plan should it resurface.”

Meanwhile, both NBAA and the European Business Aviation Association (EBAA) hailed the EU decision to delay imposing the cap-and-trade tax on CO2 emissions on flights to and from Europe. NBAA president and CEO Ed Bolen warmly greeted the EU’s statement as a major step back from the brink of a looming trade conflict.

EBAA said the move at least demonstrates the commission’s willingness to support the drafting of a global framework tackling carbon dioxide emissions. It shows that Brussels has been listening to members of the business aviation community, alongside representatives from the global aviation industry, who have long argued that a comprehensive market-based mechanism (MBM), adopted worldwide, would hold more meaning for tackling climate change, said the European association.

“The decision will empower MBM negotiations as they advance,” said Fabio Gamba, CEO of EBAA. “We are pleased that the commission recognizes the effectiveness of multilateral solutions over unilateral decisions.” However, he expressed regret that the EC had not suspended ETS for intra-European flights and concluded that “it remains to be seen how this change will affect smaller European operators who bear the brunt of administrative costs, as these will again augment considerably.”

The International Air Transport Association welcomed the EC announcement. ““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 next year,” said director general and CEO Tony Tyler. However, in a joint statement, the European Regions Airline Association and the International Air Carrier Association said that by retaining ETS for intra-EU flights the EC “will continue to impose cost and complexity on intra-EU operations with little or no overall environmental benefit.” The associations said that the compromise “unfairly penalizes many European carriers” and called on EU member states and the European Parliament to suspend ETS for all flights.

December 3, 2012, 3:10 AM

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