US and EU cross swords on carbon emissions

COME January 1, 2012 all airlines that land or take off from any point within the European Union will be subject to the carbon emissions trading scheme (ETS).

The United States has objected to the scheme, perhaps a little too late even though the US House of Representatives had two months ago directed the US transport secretary to prohibit US carriers from participating in the plan. That is now seen as a veiled threat with little bite, with no real option for US carriers. A spokesman for EU Climate Change commissioner Connie Hedegaard said the EU would not bow to pressure from the US. Sauce for the gander is sauce for the goose. It is to be seen what the US would do next, with the latest threat from an official no less than Secretary of State Hilary Clinton warning that the US would respond with “appropriate action” if the scheme went ahead but stopping short of saying what action.

Naturally the US is concerned about its carriers being disadvantaged by the EU ruling and would prefer the matter to come under the ambit of the International Civil Aviation Organization (ICAO). But ICAO has done little to develop or promote concerted alternatives, let alone efforts by some airplane manufacturers and individual airlines demonstrating their green commitment.

The US has argued that the ETS is an infringement of the Open Skies agreement, but that has been refuted by the EU, which has rebutted that it is a regulation implemented within EU territory, in all likelihood no different by comparison how other countries have also imposed certain local charges within their own jurisdiction. The International Air Transport Association (IATA) is lending support to the US’s argument, saying it is “extra-territorial”, hence an infringement n the rights of airlines flying in international airspace.

IATA also claimed that the EU initiative is a tax on carbon emissions, and this breaks international conventions. But spokesman Isaac Valero Ladron of the EU Commission refuted that argument, saying: “This is not a tax, it’s pollution saving.” How much more is this a tax than, say, the fuel surcharge that permits airlines to unilaterally pass on additional fuel costs to their customers with no considerations of efficiency? At its very best, though punitive, the ETS is supposed to motivate airlines to be more fuel-efficient in their operations.

Canada, China and other countries in Asia and Africa – practically almost the rest of the world – have also expressed their disapproval of the EU’s regulation. So far Australia is the only country outside the EU that may be following in its footstep by the middle of next year. For now, there are concerns that the EU ruling may lead to a trade war, which Airbus and some national carriers are keen to avoid, urging the EU to modify its plans. Airbus chief Tom Enders said it was “madness to risk retaliation” from these countries.

There may be compromises yet the EU has indicated it may consider exemption for airlines whose countries are implementing similar ETS plans, suggesting reciprocity. But Mr Ladron made it clear that “we (EU) don’t work on the basis of threats, but on discussions.” ICAO may be wishing it had long ago started working on an acceptable global system.

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