Brussels has presented a plan for bringing air transport within the European Union (EU) greenhouse gas emissions trading scheme, concluding that taxes and charges would bring fewer benefits and would not be cost-efficient.

The European Commission (EC) says the impact on ticket prices of an emissions trading scheme would be “modest”, ranging from zero to €9 ($11) per return flight. “With an increase of this level, aviation demand would simply grow at a slightly slower rate than otherwise. Any effect on tourism or peripheral regions…is likely to be limited,” the EC says. Brussels wants to include all flights departing from the EU, including those by non-EU carriers.

The trading scheme covers around 11,500 industrial installations, enabling participants to trade CO2 emission allowances in an open market. Companies can buy more allowances if they overshoot their limit, or sell them if they produce less than they are entitled to.

Aviation has so far been excluded from emissions trading schemes, and was left out of the Kyoto Protocol on reducing greenhouse gases, mainly due to the complex international nature of the industry. ICAO has been working towards an international emissions trading scheme for airlines, although it has been slow progress. Brussels warns that the EU’s sixth environmental action programme, which set out Europe’s long-term environmental strategy for the 2000-10 period, commits the trading bloc to take action if no solution can be reached at ICAO level.

IATA director general Giovanni Bisignani warns that the European initiative could jeopardise ICAO’s efforts. “Air transport is a global industry and the environment is a global concern. Effective solutions must be global solutions,” he says.

The European Parliament and the Council of Ministers will now respond to the EC’s plan, while a working group set up by Brussels will consider the key issues in more detail and report back next year. The Commission will then submit a legislative proposal to amend the emissions trading scheme.

The aviation industry in Europe has been quietly putting its weight behind some form of emissions trading as a more palatable alternative to taxes or charges. Europe’s airport body, ACI Europe, outlined its support for a scheme based on CO2 emission trading in August, while British Airways has taken part in a voluntary scheme.

Although airlines would boost liquidity in the emissions trading system by providing a natural buyer of allowances, significant technical obstacles remain. These include allocation methods, with the “grandfathering” of emission rights based on past levels potentially hitting fast-growing, new-entrant and low-cost carriers. The latter could also be disadvantaged by the relative price sensitivity of their passengers.

Emissions at altitude are widely thought to be significantly larger than those at ground level, although estimates as to how much vary greatly. This makes trading with companies producing ground-based emissions difficult. The international reach of the scheme beyond Europe, meanwhile, is likely to lead to complex negotiations with third countries, notably the USA.

Given the complexities involved, inclusion of aviation in the emissions trading scheme is not expected to happen until the second phase of the scheme in 2008-12, at the earliest.


Source: Airline Business