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Forecasts 2006: Environment - Emissions trading put to test


Will the gamble on emissions trading pay off for aviation?

Twelve months ago Europe embarked on an ambitious gamble in the field of environmental protection. In January 2005 the European Union greenhouse gas emission trading scheme (ETS) started, becoming the largest multinational, multi-sector scheme in the world.

Under the EU’s ETS, heavy industry is set a pollution quota and companies have to buy additional credits from other firms if they exceed this target. Crucially, the scheme excluded aviation, due to legal interpretations of international treaties in 2000, when the original drafting took place. This exemption angered green groups, who long ago adopted air transport as a bête noire, alleging that it contributes more to the radiative forcing effect of greenhouse gases than any other form of pollution, due to the altitude at which such fumes are emitted. Such was the head of steam generated that in 2005 European governments felt secure enough to vote in November to include aviation in the next phase of the EU ETS.

This is where the fun starts. The experience of the aerospace industry this year shows that even a well-defined scheme can run into serious difficulties. The Society of British Aerospace Companies has taken the UK environment ministry to task for failing to follow its own methodology when setting emissions targets for the aerospace sector, potentially lumbering the UK industry with £1 million ($1.7 million) extra in costs. The debacle, which will rumble on during 2006, illustrates the difficulty in calculating existing pollution, from which to set a quota. However, calculating emissions from moving aircraft flying on variable routes and using multinational airspace will make existing ETS allocations look like child’s play, say aviation lawyers studying the initial European Commission draft communication on its intention to include aviation in the scheme.

Fine print

The EC has pulled together a group of interested parties such as national governments, airlines, airports, manufacturers, green groups and existing participants in the ETS to form a working group looking into the details. The issues they have to tackle in the first six months of 2006 include how to forecast average fuel consumption for specific routes and devise a formula for charging foreign airlines or European ones flying outside the EU.

The results of the working group will be published mid-year and a legislative proposal will follow, which will then be debated by national governments before passing into law some time in 2008-9, the EC now concedes, missing the 2007 start of the next phase of the ETS.

On other environmental issues, 2006 looks set to be quieter than 2005, with the International Civil Aviation Organisation’s committee on aviation environmental protection (CAEP) only meeting in closed session before delivering its guidance on emissions levies at the next ICAO regular session in 2007. Heated debate is expected in CAEP, with opposition to any scheme expected to be fierce from conservative states such as the USA and Australia and oil-producing countries such as Saudi Arabia and Venezuela.

But ICAO did vote through new maximum levels for oxides of nitrogen (NOx) in March 2005, which are 12% more stringent than the 1999 levels, so the industry will have to grapple with the implications of the new NOx quota, which enter into force in 2008. Many European countries are considering even tougher local levels on NOx, not least since the gas is primarily a local air-quality issue. This year will see NOx levels at EU airports reduced, so expect to see greater use of ground electrical power replacing auxiliary power units; changes to taxiing; and possibly a promotion of public transport at airports to reduce the automotive contribution to NOx as airports struggle to meet the targets.

ICAO also has a role to play this year, enshrined in the Kyoto Protocol on Climate Change, to provide leadership on environmental matters related to civil aviation. The protocol came into force in February 2005 following the ratification by Russia, although the largest notable exception to the protocol is the USA, whose government doubts the certainty of scientific arguments linking carbon dioxide emissions and global warming.

Balanced approach

There will also be further legal cases this year on aircraft noise, the oldest environmental problem facing aviation. In Europe, airports have to apply a “balanced approach” to land use planning and airline operational practices before imposing limits. Several European airport operators will see their noise bans challenged through local courts having to assess whether this approach was followed, but expect few further legislative changes.

But all eyes will be on how the emissions trading scheme incorporates aviation, as many cite the environment as one area where Europe really can take the lead and show the rest of the world the way.

JUSTIN WASTNAGE /SENIOR REPORTER

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