ETS is the wrong choice for a greener industry

Even if aviation accounts for 2 percent of man-made CO2 emissions, and even though today’s aircraft are 70 percent more fuel-efficient than 40 years ago, the airline industry remains a part of a growing global problem. It must be part of the global solution.

That’s why IATA, ACI, CANSO and the International Coordinating Council of Aerospace Industries Associations have voluntarily adopted three specific environmental targets.

Their first goal was to improve fuel efficiency by an average of 1.5 percent per annum between 2010 and 2020. This would lead to a reduction of 2.2 billion tonnes of CO2. They also aimed to implement Carbon Neutral Growth from 2020, which is essentially capping net emissions from that date. Finally, they pledged to reduce net emissions by 50 percent by 2050 compared to 2005 levels. IATA has also adopted a fourth target: Use 10 percent alternative fuel by 2017.

Sustainable and commercially viable alternative fuels for aviation will be the game-changer in reaching global aviation emission goals. We must also eliminate infrastructural capacity shortages. The Single European Skies proposal and the NextGen program can eliminate 41 million tonnes of CO2 and save more than $21 billion by 2030.

We must also have fiscal and regulatory incentives which have a positive impact on both the environment and the economy because air transport remains a formidable catalyst to socio-economic growth. Yet some governments undermine their own economies by using the green banner to simply tax airlines and thereby limit both their contributions to socio-economic growth and their ability to invest in greener technology and energy.

Fiscal policy should incentivize desirable behavior and punish undesirable behavior. Airlines, however, have to use aircraft, engines and fossil fuels for which they have no viable lower carbon alternative.

It is simply senseless for countries desperately trying to stimulate economic growth to stifle the airlines, which are the engines of growth. In these exceptionally difficult financial times, one should not clip the wings of an industry that makes economies take off. The infamous EU emissions trading scheme will cost the airlines €3.5 billion in 2012, a total that will increase every year after that.

The EU ETS is ill-advised and ill-conceived. It’s divisive and distracting. As Brian Simpson, chairman of the transport committee of the European Parliament, candidly admitted last November, “Within the EU, governments are keen to press ahead because they desperately need the money. They won’t say that — oh, no. They will claim it’s to help the environment. But let’s be under no illusions, here. Both ETS and APD [air passenger duty] are being used as revenue streams for hard-up governments and not for environmental protection measures.”

To add insult to injury, the EU refuses to guarantee that these revenues will be directed to environmental or climate change projects, while the UK Chancellor has confirmed that that there are no plans for the air passenger duty — a charge that has so far netted the UK government £2.9 billion to offset the cost of the EU ETS.

To make matters worse, the ETS may actually increase airline emissions by encouraging airlines to impose stopovers at hubs outside Europe, lengthening the flight distance and reducing flight efficiency.

Response to the new law has been withering. Last year, the U.S. House of Representatives voted to prohibit U.S. carriers from participating in the EU ETS. The Russian authorities are considering similar legislation. Numerous regional airline associations have criticized the scheme. And, of course, U.S. carriers recently challeneged the ETS in European court, only to be rebuffed.

Opposition rages on, but for now, carriers in these countries are lining up for their allowances, expressing their distaste of the ETS and vowing to defeat it. Unilateral and extraterritorial national or regional schemes that fuel legal battles and trade wars do not help the environment. With so many formidable challenges at home, this is not the time for the EU to pick up a fight with the rest of the world.