IATA warns EU ETS could trigger trade war

Opposition from governments against the inclusion of aviation next year in the European Union’s Emissions Trading Scheme (EU ETS) is growing and could result in a trade war, IATA warned.

IATA still is pushing for a global solution within ICAO through negotiations (ATW Daily News, Dec. 1), but the “level of opposition is mounting. More than 20 states have indicated their dissatisfaction with Europe’s unilateral action. The danger of a trade war is still possible with Russia, China and India … while a bill is making its way through Congress to prevent US carriers from taking part,” IATA director-aviation environment Paul Steele told reporters in Geneva via satellite from the Climate Change Conference in Durban, South Africa.

Steele also said the option of filing a complaint under Article 84 of the Chicago Convention is being increasingly discussed. Article 84 allows ICAO members to file a complaint against other members for violating “the cardinal principle of state sovereignty” outlined in the Convention on International Civil Aviation (the Chicago Convention).

Last week, several airlines confirmed to ATW that using Article 84 to stop the EU ETS was raised at the ICAO council last month. Also, Assn. of European Airlines (AEA) secretary general Ulrich Schulte-Strathaus conceded to ATW that the risk of retaliation against EU carriers and an action through Article 84 were becoming a real concern.

According to sources, India is seriously considering using Article 84 against the EU and its 27 member states. There have been similar complaints in the past but all of them have been settled out of court. If no settlement is reached, the case will end up in the International Court of Justice, the principal judicial organ of the United Nations, in The Hague.

Steele said the EU was in a difficult position. “There is demand from governments worldwide to change the EU ETS but it is not easy to change an existing regulation and all change options— intra-EU scheme, departing flights only, delay of the introduction—are problematic,” he said, adding that the only “real way to solve this is for all governments to get back around the table at ICAO.”

EU climate action commissioner Connie Hedegaard reiterated the EU was steadfast in its decision to include aviation in its ETS from next month. “There is no way the EU will change legislation,” she said in Durban. She also criticized the US House of Representatives for passing a bill prohibiting its airlines from participating in the ETS aviation scheme, calling the move “arrogant and ignorant.”

The House bill is merely symbolic at this stage, with action needed in the US Senate to move the issue forward. To that end, US Senator John Thune (R-S.D.) this week proposed similar legislation that he said would “enable the US Dept. of Transportation to take necessary action to ensure America’s aviation operators are not penalized by any tax unilaterally imposed by the EU.”