EU carbon tax put on the back burner

EU Climate Commissioner Connie Hedegaard, Courtesy reuters.com

THE carbon trading scheme for all airlines landing in and taking off from airports within the European Union (EU) was to have been implemented on Jan 1, 2012. Then, in a prelude to the planned implementation amidst objection from the United States, a spokesperson for EU Commissioner for Climate Change Connie Hedegaard said the EU would not bow to pressure from the US. (See US and EU cross swords on carbon emissions, Dec 26, 2011)

One week into its said implementation, China joined the protest making it illegal for its carriers to comply. (See Will EU calll China’s bluff that it will not cooperate on carbon trading, Jan 5, 2012) EU spokesperson Isaac Valero-Labron reiterated: “We’re not modifying our law and we’re not backing down.” There were commercial and political implications. Airplane maker Airbus backed by six European airlines petitioned the EU in support of the China position. (See Pressure on European Union to rethink carbon trading scheme, Mar 12, 2012).

More countries raised their objection while those airlines that saw no way out of the compliance said they would pass on the cost to the consumer, an indirect threat on how it would backfire on the economy.

By the end of 2012, the EU succumbed to international pressure to suspend the Emissions Trading Scheme (ETS), agreeing to allow the International Civil Aviation Organization (ICAO) to have another go at working out an acceptable framework. But Ms Hedegaard reminded the industry that the scheme would be reintroduced in a year’s time if ICAO failed. (See Carbon emissions policy setback: EU suspends scheme, Nov 12, 2012)

That was the beginning of the end. The day of reckoning has arrived and it looks like the airlines, bargaining for time, have won, with environmentalists expressing their disappointment with the EU Commission. If there had been a change of circumstances, the EU is pointing a finger at the slow economic recovery as a strong reason to support a delay in implementing any binding targets that can only retard growth. In the broad picture not confined to the aviation industry, the EU is proposing deeper cuts in emissions of 40 per cent by 2030 instead of the lower 20 per cent by 2020. The commitment as the EU suggested has not changed; it is only a matter of time.

Perhaps the EU has also wised up to the pains of taking the leader. Why should the EU make the sacrifices while the rest of the world continues to loll in the smog? Australia, for one, which would have had followed in the EU’s footsteps, had a rethink with a new government in power. The international community continues to meet to discuss issues of climate change at frequent intervals only to agree to disagree and to meet again. “It will require a lot from Europe,” said Ms Hedegaard. “If all other big economies followed our example, the world would be a better place.” But at the same time, she also hit out at environmental activities for making unrealistic demands: “We are trying to do something that is achievable, that is doable and practical.” Suggesting the difficulty of achieving consensus among 28 members within the EU itself on broad climate change issues, we can only appreciate how much more difficult it becomes when the issues have an impact across political borders.

There is hope yet as we await a recommendation from ICAO. Until then, it looks like the ETS has been put on the back burner, risking a natural demise.

Australia will adopt carbon trading scheme

While the European Union’s carbon trading scheme remains frozen following protest by airlines across the globe, Australia has said it will be scrapping its current carbon tax and switch over to the emissions trading scheme similar to that of the European Union.

Qantas is one of some 300 companies affected by the carbon tax.

Photo Oscar Siagan/The Age

Australian Prime Minister Kevin Rudd said the new scheme would reduce the cost from the current A$25.40 (US$23.42) per tonne to about A$6.00 per tonne, and hopefully the benefits would be passed on to consumers. While the tax is a penalty levied on companies for not being green enough, it is inevitable that the higher cost eventually finds its way to pinch the consumer’s pocket.

It is not clear how the trading scheme, if implemented, will affect Australian and other airlines operating to and from Australian destinations; the universal application of the EU scheme has drawn objection from foreign carriers. Australia may yet have the benefit of learning from the outcome of the EU’s review expected by November – if it comes then – before its own implementation, which will be formalized after the nation’s elections for which a firm date has yet to be fixed. But, only if the Labour party continues to govern the country, for the opposition leader Tony Abbot has said he would do away with a price on carbon altogether if the Conservative party won.

Mr Abbot called the emissions trading scheme a “so-called market in the non-delivery of an invisible substance to no one.” He added: “It’s been absolutely obvious that the world is not moving towards taxes, whether they’re fixed rates or floating taxes.”

Whether it is good or bad news, it is a complex issue. Mr Rudd said the rationale for the termination of the carbon tax in favour of the EU-style trading scheme is “the reduction of costs for small businesses” although the penalty is really one imposed on the big polluters. Whatever the tax mode, the consumer will bear the brunt of the cost. The question is: How much? The trading scheme as introduced by the EU, however, is also aimed at encouraging affected companies to be more efficiently green – they may even gain from the trading. The problem is that most companies are diffident about that benefit and more concerned about the penalty.

So far the International Civil Aviation Organization which has been entrusted with the task to propose an alternative scheme to the EU’s scheme by November has not reported on any significant progress in its review. Do not be surprised that it will be a long time coming, although the EU has said that short of that, it intends to push ahead with its original plan. But if the delay does happen, it would be interesting to see if Australia would take over the lead.

KLM advances green effort

Courtesy Boeing

KLM last week becomes the first airline to operate a regular weekly transatlantic flight, using an eco-friendly fuel mix of 25 per cent Dutch airline cooking oil and 75 per cent jet fuel.

The cooking oil, which comes from restaurant wastes, is able to reduce carbon emissions by up to 80 per cent. This is noteworthy, considering that aviation is responsible for 2 per cent of global emissions, and that number continues to grow.  

Captain Rick Shouten, who piloted KLM’s maiden transAtlantic biofuel flight from Amsterdam’s Schiphol to New York’s JFK, told the New York Post: “For pilots, it’s totally transparent. It’s as if you’re flying a normal aircraft.”

Back in Jun 2011, KLM too was the first airline to operate the world’s first commercial biofuel flight when it carried 171 passengers from Amsterdam to Paris, also using cooking oil. It was a major step forward in the green pursuit. Since then, a number of airlines have powered either test flights or commercial flights using a mix of jet fuel and plant alternatives that include jatropha, algae, camelina, carinata, coconut and babassu.

The list of airlines championing the green effort include Virgin Atlantic (which flew the first biofuel test flight from London to Amsterdam), AeroMexico, Air Canada, Air China, Air France, Air New Zealand, Alaska Airlines, Continental Airlines, Etihad Airways, Finnair, Brazil’s GOL, Iberia, Interjet, Japan Airlines, Lufthansa, Canada’s Porter Airlines, TAM, Thomson Airways and United Airlines.

However, still in its infancy stage, biofuel is expensive, and may cost as much as three times the price of regular jet fuel. “A lot still has to happen before biofuel will be available on a large scale and for it to be economically competitive in relation to fossil-fuel kerosene,” said KLM. “We cannot achieve this alone. We absolutely need the commitment and support of all the relevant parties: business, government and society.”

For it to be sustainable there has to be cheaper refining methods and widespread use across the industry. Support from national agencies at this stage is imperative, if only because saving the environment is everybody’s business.

Carbon emissions policy setback: EU suspends scheme

THE European Union (EU) has succumbed to international pressure to suspend the Emissions Trading Scheme (ETS) that it introduced on January 1 this year. The ETS rules that airlines that land at EU airports will have to pay a carbon emissions tax.

Among the chief protesters are the United States, China and India – the last two countries actually banning their airlines from participating in the scheme.

Imperfect as the ETS may be, its suspension is a setback in the efforts to combat pollution and global warming. The EU commission on climate change had earlier said it was going ahead with the implementation only because international agencies such as the International Civil Aviation Organization (ICAO) had failed to come up with any proposal. There is little evidence that while airlines brag about their commitment to the green effort, they are keen on any framework that would add to their operating costs, in spite of the EU’s argument that the ETS would add but only between four and 24 euros (US$1.27) to the price of a long-haul flight. To the airlines, it is 17.5 billion euros (US$22.3 billion) collectively over eight years.

EU Climate Commissioner Connie Hedegaard, Courtesy reuters.com

The EU is prepared to allow the ICAO another go at working out an acceptable framework, with EU climate commissioner Connie Hedegaard saying, failing which the ETS would be reintroduced a year from now. Having taken a step backward, it may be difficult to re-implement the veiled threat in the absence of a compromised solution emerging. The game belongs to ICAO – no doubt an unenviable task – so long as it can demonstrate progress, a little each time even if it is the mere act of meeting and agreeing to disagree, and the commitment to continually meet again to try and resolve previous disagreements.

Meantime, will Australia succeed where the EU has failed? The proposed date of its implementation of a similar scheme by July this year has come and gone. And lest it be forgotten, Qantas and Virgin Australia announced early in the year that they would be adding a carbon tax to the fare. Travellers would be wise to check out the component costs of their tickets – another controversial policy that makes you wonder why so many airlines are finding it so hard to be honest about what they are charging their customers for!

Cathay Pacific bans shark fin carriage

THERE was a time when airlines such as Singapore Airlines would serve shark fin soup to the well-heeled in first class. But that had long been taken off the menu in the early days when animal activists made much of the cruelty in harvesting the fin.

Today, Cathay Pacific Airways officially bans the carriage of unsustainable shark products including shark fin. In a statement that it issued on Sep 4, the Hong Kong-based carrier said: “Due to the vulnerable nature of sharks, their rapidly declining population, and the impacts of overfishing for their parts and products, our carriage of these is inconsistent with our commitment to sustainable development.”

 

The ban takes immediate effect but would take three months to be in place.

Apparently Cathay received a petition from 41 international environmental organizations to stop the carriage. Hong Kong government statistics showed that Cathay was responsible for carrying 650 tonnes (64%) out of a total 10,200 tonnes of shark fin imported into Hong Kong.

Cathay said it had studied the issue for “a very long time” and its decision was “based on scientific data.”

However the decision was arrived at, it is a commendable move on the part of Cathay to demonstrate the social responsibility that a company must assume even if it means foregoing money-making opportunities and angering traders using their service.

Air transportation provides a necessary link in moving such products to where they are demanded. It is hoped that Cathay and other airlines will heed the call of environmentalists to not only stop the carriage of shark fin but also tighten procedural loopholes and implement stringent checks to prevent the illicit carriage of live endangered animal species.

Good job, Cathay!

Four more airlines go green – Porter, Air Canada, Aeromexico and GOL

IT is good news when yet another airline makes the effort to go green. This time, under the auspices of the International Civil Aviation Organization (ICAO), four airlines participated in four connecting flights from Montreal to Rio de Janeiro, each using different types of sustainable biofuels. Dubbed the Perfect Flight, operated by Porter Airlines, Air Canada, Aeromexico and GOL, it departed Montreal at 1130 hours on June 18 and arrived in Rio at 1400 hours a day after.

Picture courtesy The Vancouver Sun

Air Canada, which operated the second leg from Toronto to Mexico City, expected its flight to generate at least 40 percent fewer emissions by using jet fuel derived from recycled cooking oil and through other fuel-saving measures such as fuselage wash and wax to improve aerodynamics, installation of lightweight aisle carpet, streamlining push-back procedures to reduce fuel usage, taxiing aircraft to runway with one engine, minimizing taxi time to runway, reduced thrust takeoff, and optimized climb to optimal cruise altitude.

Air Canada executive vice-president and chief operating officer Duncan Lee said: “Air Canada fully accepts its responsibility to reduce its footprint and our first flight using biofuel tangibly demonstrates our ongoing commitment to the environment. Since 1990 our airline has become 30 percent more fuel efficient and we are determined to increase these gains through cutting-edge measures.”

Indeed with increasing pressure from environmental groups and following the controversy of the European Union’s carbon trading scheme which some nations and their airlines have voiced their objection to, there is an urgent need to find an acceptable global solution. Lest the industry becomes embroiled in messy disputes that could result in unnecessary and damaging retaliatory actions by the parties concerned, ICAO will have little choice but to play a more active role in pushing the agendaSo said Airbus President and CEO Fabrice Bregier: “To make this a day-to-day commercial reality, it now requires a political will to foster incentives to scale up the use of sustainable biofuels and to accelerate the modernization of the air traffic management system. We need a clear endorsement by governments and all aviation stakeholders to venture beyond today’s limitations.”

Qantas goes green

THE red kangaroo is flying green. It has announced a feasibility study to commence in May into the potential for an Australian sustainable aviation fuel industry, backed by funding from the Australian government.

This was heralded by the airline operating Australia’s first commercial flight powered by biofuel on April 13. The flight operated from Sydney to Adelaide and back. To show the Qantas group’s commitment to using sustainable aviation fuel, two Jetstar flights also flew, powered by the same fuel, from Melbourne to Hobart and back on April 19.

The biofuel is a 50:50 blend of biofuel – derived from recycled cooking oil – and conventional jet fuel certified for use in commercial aviation. Its ‘life cycle’ carbon footprint is said to be around 60 per cent smaller than that of conventional jet fuel.

Recognizing the global call to reduce carbon emissions and the pressure on airlines to meet carbon emissions standards or pay a penalty for non-compliance – beginning with the European Union’s carbon emissions trading scheme, and a similar scheme soon to be introduced in Australia – Qantas chief executive said: “Alternatives to conventional jet fuel are vital to the Qantas aviation industry meeting ambitious targets for carbon-neutral growth and emissions reduction.” The Qantas study would tell how that could be achieved in Australia.

It is not really a matter of choice. Qantas makes an early move, and shows that action speaks louder than words.

Qantas raises fuel surcharge yet again, spinning the same stock explanation

AREN’T we tired of listening to the same stock explanation every time an airline announces increases in the fuel surcharge? The announcement is usually prefaced by how much the prices of jet fuel have gone up, and a reminder to the public that fuel makes up the biggest component in an airline’s operations. And before you call the move unreasonable, the airline will have you know that the increase never fully covers the full impact of the soaring fuel cost, in fact barely.

The latest round of known increase comes from Qantas, which will raise the surcharge for international flights on April 12. Yes, yet again, making it an annual affair. And it is the same story that has been used before by all and sundry in the industry.

You hear it so often that you simply go “blah” these days. You no longer care to question or seek to understand. Raising the fuel surcharge is in reality increasing the fare, because ultimately it is the bottom-line number that matters – the full fare of the ticket to include all taxes and surcharges.

Short of more innovative methods to prop up the business, airlines are falling back on surcharges. Qantas had already in February imposed a carbon tax – to compensate for penalty costs imposed on the airlines by the European Union for failing to meet set carbon emissions standards vis-a-vis a carbon emissions trading scheme.

So much about such charges being cost recoveries, they are really revenue earners. The downside is that they may reduce travel or cause a loyalty shift. For Qantas, its home clientele for international operations has fallen to 20% compared to its stronger domestic market of 65%. More Australians are travelling with competitors such as Emirates and Singapore Airlines, therefore making it more expensive is not going to help.

Pressure on European Union to rethink carbon trading scheme

AN apparent move by China to block Airbus deals in retaliation against the European Union`s implementation of the carbon emissions trading scheme to all airlines operating to and from the EU territory has given gumption to Airbus to plead for a rethink by the authorities. The Airbus petition has the support of six European airlines, namely British Airways, Virgin Atlantic, Lufthansa, Air France, Air Berlin and Iberia.

China has already banned its airlines from participating in the scheme – which poses a headache for the EU which has so far shown no willingness to concede although the implementation date was January 1. While the EU could prevent Chinese carriers from landing within its territory, such action would have political ramifications.

The United States is also opposed to the scheme and some other countries too have voiced their displeasure but would comply.

Australian flag carrier Qantas along with compatriot Virgin Australia have already announced a carbon surcharge to be added to the ticket fare, perhaps also largely in preparation for a similar carbon trading scheme to be implemented in Australia by July.

Singapore Airlines chief executive Goh Choon Phong said: `We will comply but we don`t think it is an equitable measure.”

The external protest is now boosted by pressure from within. Airbus and its supporters are citing possible job losses. Airbus chief executive Thomas Enders said: “The measure is threatening more than 1,000 jobs (at Airbus) and another thousand through the supply chain.”

Does the EU have a Plan B or will the issue go the way of reciprocity the way that freedoms of the air have been negotiated? The unfavourable current economic conditions might provide the EU with an excuse – if it needed one – to placate some key trade partners without conceding its objective. But it is slippery ground. To get back up again may be as difficult, especially when the renewed call for a global solution through an international agency is bound to be plagued with differences that can only stall the process.

Doing nothing is an option, as the EU waits and sees.

Increased fuel surcharge and new carbon tax may reduce air travel

SINGAPORE AIRLINES (SIA) will raise its fuel surcharge from March 8. The increase also applies to SilkAir flights. Qantas has already done so from February for domestic and regional airfares and from February 15 for international flights.

With all the news about how many airlines are reporting fall in revenue because of the rising fuel price, this should not come as a surprise. It is a fact that the price of jet fuel has gone up, and today reached a record level following reports of a pipeline explosion in Saudi Arabia.

SIA said: “The adjustments will offer only partial relief from the higher operating costs arising from increases in the price of jet fuel.” The explanation is not new. It is not an argument to be refuted. The challenge it will face – as will the other airlines that are likely to follow suit – is customer retention in the face of higher fares (including fuel surcharges).

Just as several airlines are reporting improved passenger traffic in January and starting the year on a promising note after the dismal results of the last quarter of 2011, the industry may be faced with another round of travel cutback.

It will cost even more to fly Qantas because the Australian flag carrier will be imposing a new carbon emission surcharge following the implementation of the carbon emission trading scheme by the European Union (EU) in January and a similar plan by the Australian government in July. The fee will be applied on a per sector basis. For domestic and regional flights, based on a carbon price of A$23 per tonne, it will range from A$1.82 to $6.86. For flights operating into Europe, tickets purchased from 15 February will be subject to an A$7.00 carbon surcharge.

Qantas’ subsidiary budget arm Jetstar will also see higher fares.

Virgin Australia will similarly be imposing the new carbon surcharge which ranges from A$3.00 to A$6.00 for domestic flights. The airline, which operates codeshare flights with Etihad Airways from Abu Dhabi to various destinations within the EU, will be adding a carbon surcharge of $3 per passenger from 1 March. However, the fee may fluctuate.

Expect other airlines to follow suit but with the exception of carriers from China, which has banned its carriers from participating in the EU’s carbon emission trading scheme and from raising fares on that account. However that turns out, the cost of air travel is certainly heading north, and this may not be the best of time for airlines to push it without some cautionary discernment.