Signs Europe Bending on Airline Carbon Fee

April 12, 2012
The European Union, heading for a trade war over a new toll on the greenhouse gas emissions of international airlines using European airspace, has been warned that the measure could wreck the prospects for global action on climate change.

In the latest assault on a measure that came into force on Jan. 1, Jayanthi Natarajan, India’s environment minister, said Wednesday that the E.U.’s Emissions Trading System, which requires airlines to buy carbon permits to cover excess emissions, was a “deal-breaker” in the context of international efforts to curb global warming.

“For the environment ministry, for me, it is a deal-breaker because you simply cannot bring this into climate change discourse and disguise unilateral trade measures under climate change,” she said.

The Union introduced the measure because it lost patience with the slow pace of progress within the 191-member International Civil Aviation Organization to introduce a worldwide system. With carbon dioxide from airplanes accounting for about 3 percent of the world’s greenhouse gas emissions, Europe’s legislators decided that action was overdue.

European officials insist the impact on airfares is minimal: for a trans-Atlantic flight, it’s the price of a cup of coffee. But if airlines do not have credits to cover their emissions, they would face fines and could ultimately be banned from using European airports.

My colleague James Kanter has pointed out that some airlines opposed to the new E.U. rule could actually make money out of it by selling spare greenhouse gas credits to others who exceeded their quotas.

The measure has nevertheless unleashed a furious reaction from governments and airlines outside the Union. And there are now signs that European resolve is cracking as political leaders come under pressure from their own airlines and airplane makers.

India has joined China in banning its airlines from submitting to the E.U. rules and more than 20 countries, including the United States and Russia, oppose the carbon levy as a unilateral measure that may violate international trade rules.

A group of U.S. airlines recently dropped a private lawsuit against the European Union in favor of letting Washington deal with the issue. Airlines for America, the U.S. industry group, said opposition to the E.U. law had grown so much that governments should now take the lead.

Connie Hedegaard, the E.U.’s climate action commissioner, told The Financial Times last month that the threat of a trade war would not force the alliance to back down. “You can’t threaten a trade war just because you don’t like European legislation,” she said.

Since then, however, François Fillon, the French prime minister, called last week on the European Commission in Brussels to defuse the dispute by finding a solution acceptable to all sides.

Like other leaders of the main European economies, he has been under pressure from domestic airlines and manufacturers concerned about the impact of a wider trade war. China has already retaliated by suspending an order for $14 billion-worth of passenger jets from Airbus.

Pascal Pavani/Agence France-Presse — Getty Images
A new China Southern Airbus A380 took off from the Airbus delivery center in Colomiers, France last year. China has suspended billions in Airbus orders.
The French-based company and six leading European airlines wrote to European government leaders last month asking them to exempt airlines from the carbon emissions rule or risk further sanctions that could damage European industry.

India’s warning that the dispute could hamper already slow-moving action on global warming will come as a further blow to climate change activists. Ms. Natarajan held out against a climate change deal at the last talks in Durban, South Africa, in December before eventually agreeing on a compromise to cut global carbon emissions.

There are indications, however, that the Union might be prepared to back down in return for global measures that would suit Europe’s climate change agenda.

Airlines will not be asked to put up cash for carbon permits for another year, leaving time for a compromise to be worked out.

In a reply to Mr. Fillon, José Manuel Barroso, the European Commission’s president, hinted that the E.U. might be prepared to drop the new rules if it could make progress toward a global deal on airline emissions. “We continue to work in pursuit of an international solution through the International Civil Aviation Organization,” he said.
source: IHT