A new deal to reduce carbon emissions: Better late than never

alaska-courtesy-alaska
Picture courtesy Alaska Airlines which was ranked the msot fuel-efficient airline in the United States by the International Council on Clean Transportation in 2013.

FOUR years after the failed implementation of the Emissions Trading Scheme by the European Union (EU) in 2012, last week’s agreement among more than 190 countries in a deal to reduce CO2 emissions under the International Civil Aviation Organisation (ICAO) umbrella was a momentous event. Britain’s Aviation Minister Lord Ahmad said: “This is an unprecedented deal, the first of its kind for any sector… Until now, there has been no global consensus on how to address aviation emissions.”

From 2020, any increase in airline CO2 emissions will be offset by activities such as tree planting. Participation in the program will be voluntary right up to 2026. However, most nations are expected to comply. Countries that had previously protested have shown their support, including China and Brazil. Exceptions include Russia and India. India reiterated that the deal puts an unfair burden on emerging economies.

As much as there is applause for the new pact to stabilise climate change, noting that aviation alone contributes to at least 2 per cent of the world’s carbon emissions, there are also reservations about its effectiveness. Environmentalists are concerned about the effort lagging behind the demand for air travel. Bill Hemmings from the green group T&E said: “Airline claims that flying will now be green are a myth. Taking a plane is the fastest and cheapest way to fry the planet and this deal won’t reduce demand for jet fuel one drop.”

The pressure will be on the airlines to acquire more fuel efficient aircraft but plane makers may not have the capability not only to cope with the demand but also to constantly innovate fast enough for better solutions. A brighter note is how some airlines have begun using cleaner-burning biofuels.

The new deal banks on a principle of offsetting that may be viewed more amenably as a form of investment in a greener world instead of the previously proposed carbon trading scheme of the EU and the pecuniary penalty of a fine imposed on defaulters. Under the program, airlines will buy credits to offset emissions. The credits could come from projects aimed at reducing greenhouse gas emissions, such as forest conservation programs and alternative energy sources.

The costs of offsetting are likely to be passed on to the consumer. No surprise there. It will mean higher airfares, or another surcharge in an already long list of ambiguous costs. While industry experts say it will not be significant, more discerning travellers will be quick to point out how sometimes “other charges” amount to more than the so-called airfare per se.

Presently offsetting rules are far from being clear and there is need too to consider methods of monitoring, measurement and implementation. The question of fairness will remain a perennial problem, hence dissension by some nations. So far only about one third of the agreeing nations have said they would participate in the voluntary phase.

Yet to be discouraged by negative considerations however numerous they are is a failure to recognise the breakthrough after years of wrangling to get the parties concerned on board. The road ahead is not without bumps as the industry works at finding an acceptable balance between growth in aviation and an increase in carbon emissions. There is some comfort to be optimistic and hoping.

Garuda Indonesia poised to expand

IT came so timely that following the opening of the new Terminal 3 at Jakarta’s Soekarno-Hatta International Airport and its declared ambition to rival Singapore Changi Airport and Kuala Lumpur International Airport in attracting international traffic, Indonesian carriers have been cleared to resume flights to the United States after an absence of nine years.

The Federal Aviation Administration (FAA) is satisfied that Indonesia is complying with International Civil Aviation Civil Organization (ICAO) safety standards. Formal final approval from Department of Transport (DOT) and FAA is expected soon.

Indonesia has been plagued by a number of air mishaps involving home-based airlines Lion Air, Mandala Airlines and Garuda, particularly in the years before 2007 when the US imposed a ban on its operations on its soil. More recently in 2014, Indonesia AirAsia crashed into the Java Sea, killing all 162 people on board.

The US lift of the ban came after the European Union had lifted its ban on three other Indonesia airlines – Lion Air, Batik Air and Citilink – in June this year.

Garuda AFP

With the US and Europe open, Garuda for one, if not the other Indonesian carriers as yet, is poised to expand. The Indonesian flag carrier has launched direct services to London (Gatwick) and is planning to launch services to New York (JFK) and Los Angeles next year. And if the Sytrax survey for the last two years (2014 and 2015) is anything to go by for its success, the airline was ranked among the world`s top ten airlines which include other Asian airlines namely Singapore Airlines, Cathay Pacific and EVA Air.

The elusive Asean Open Skies dream

Courtesy Asean

Courtesy Asean

STILL waiting. Asean Open Skies continues to be an elusive dream for the ten-nation bloc as members renewed their commitment at this year’s Asean meeting of their leaders in Kuala Lumpur. Asean, which stands for Association of Southeast Asian Nations, is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

A new declaration to form an Asean Community all but reiterated the association’s original manifesto, the progression reinforced as building “economies that are vibrant, competitive and highly integrated, and an inclusive community that is embedded with a strong sense of togetherness and common identity.” The Community will be formally instituted on Dec 31, aiming to eliminate trade barriers to form a single market and production base.

Since the Open Skies policy has been part and parcel of that umbrella ambition, it marks another milestone as a positive thrust in the desired direction although the target was to have it fully implemented this year. But where does the Open Skies stand in the development?

Much was said in the past about hurdles posed by the region’s disparate geography, economic disparity, different political make-up and diverse cultural practices. Not in the least, the different levels of economic progress and welfare across the region continue to pose difficulties for member nations to move at the same pace towards the ideal commonality. A single market modelled on that of the European Union (EU) is still a long way off.

No one denies that liberalisation will benefit Asean and fuel aviation growth in the region. It may open up channels for collaboration among operators but lest it be misconstrued, it does not necessarily run on complementary operations as a single entity against the rest of the world. Open skies means freeing up the competition across the borders and breaking down barriers of entry which allows neighbouring carriers to compete with home carriers on a level playing field. Therefore, the fear of competition among Asean carriers – each at a different level of growth – is real. The major carriers operate very much the same routes, and there is competition to channel traffic away from home bases through hub and other airports. Asean has a myriad of carriers, many of them thriving on niche and closed markets. The question is: Are they ready?

The EU has seen increased competition in the single market, benefitting customers and driving carriers to be more cost-efficient. Low cost carriers such as Ryanair and easyJet have grown to be more than just low-end niche players but serious threats to legacy airlines which are already struggling to stave off competition from foreign carriers which are more efficient and service-friendly. The single market has also led to mergers for strength, such as the International Airlines Group which conglomerates British Airways, Iberia, budget carrier Vueling and Aer Lingus, and is 10-per-cent owned by Qatar Airways. (See International Airlines Group partnership works, Nov 26, 2015) It is hard to envisage at this stage such a development within Asean, no less for the reasons already mentioned.

To be fair, the region has seen some progress in the liberalising process, even as the goal post keeps moving away. Some major airlines are already preparing for the eventuality as the market shows signs of growing, particularly in the demand for budget travel. However, if the failure of Tigerair’s forays into the Philippines and Indonesia as a joint-venture partner is any indication of the climate for cross-border investment, it again points to the region’s readiness and propensity to sustain the efforts. The pace is not moving fast enough, and so long as the goal post keeps shifting forward, it is easy to lose that drive.

Priorities can change quickly. Asean nations are caught in the current of the global scramble for economic pacts across a wider region in a world that is increasingly being threatened by geopolitical rivalry down economic lines. They, not as a bloc but individually, risk isolation and being disadvantaged by non=participation. This could be a distraction away from the Asean agenda.

Four Asean members – Brunei, Malaysia, Singapore and Vietnam – signed the Trans-Pacific Partnership (TPP) agreement which took effect on October 5 along with Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru and the United States. Indonesian president Joko Widodo at a subsequent meeting with US president Barack Obama expressed his country’s interest in joining the bloc. Asean itself has proposed a Regional Comprehensive Economic Partnership to engage non-members Australia, China, India, Japan, New Zealand and South Korea. However this does not prevent member nations from independently pursuing bi-lateral trade agreements which may see implementation of some measures such as faster immigration channels between these parties ahead of similar facilitation within a common Asean union.

Within the aviation industry too there are alliances and there are alliances, so to say. Global alliances represented by Star, OneWorld, SkyTeam do not preclude member airlines from forging other partnerships outside their ambit, some of which are cross-border agreements. It seems to complicate the relationships, but apparently it also opens up opportunities that may otherwise be thwarted by restrictions of exclusivity.

This year’s Asean Summit – its 27th – is focused on forging an Asean Community which will be formally instituted on Dec 31. The lack of an Asean identity is viewed as a major hurdle in the progress towards a no-barriers common marketplace. Singapore prime minister Lee Hsien Loong said: “One of the constraints on government – and one of the reasons Asean finds it difficult to make progress together – is (that) there is not a very strong sense of Asean identity:” (The Straits Times, Nov 23, 2015) He added: “I think there is some distance yet.”

There was mention of the Asean community engaging in projects such special lanes for citizens of member nations at airports and facilitation vide an Asean Business Travel Card.

But new issues that surfaced recently aren’t going to make the forward thrust any easier. Indonesia, the largest community in the bloc, has expressed its intention to rein in administration of part of its airspace presently under the purview of the Singapore authorities, but its aviation safety record is raising reservations. Following findings by the United Nations International Civil Aviation Organization (ICAO), the US Federal Aviation Administration (FAA) has downgraded its safety rating of Thailand’s aviation authority over concerns about safety standards.

Such issues are likely to shift the priorities of not only the affected nations but also the bloc as a common entity, particularly considering its small composition of member states. So it appears that Open Skies will be taking a backseat in the meantime

This article was first published in Aspire Aviation.

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

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.

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!

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.”

Full-fare disclosure gains momentum

JUST as the United States kicks in a new regulation on January 24 requiring airlines to publish the full fare including taxes and surcharges in their sale pitch, Australia is taking Malaysian budget carrier AirAsia to court for misleading advertisements.

According to the Australian Competition and Consumer Commission, AirAsia’s website did not show the full disclosure fares for some routes out of Melbourne, Perth and the Gold Coast. The commission said: “Businesses that choose to advertise a part of the price of a particular product or service must also prominently specify a single total price.” As a consequence, AirAsia may be fined.

The new rule introduced by the US Department of Transportation (DOT) has already been in force within the European Union (EU) although there, it applies only to EU carriers. Now Canada is working on a similar implementation which Canadian carriers have argued is unfair because foreign carriers are excluded. Quite rightly so, why should any airline targeting the same market be exempt?

More disturbing is how all these arguments actually lend weight to the new rule to protect the right of the consumer. Indeed, are there no ethical considerations in the business of making money?

After the EU, North America and Australia, it should be expected that the rule should gain momentum in other regions, especially if it applies to all carriers. The absence of universal applications is apt to raise concerns about unfair competition. So, recalling all that fuss about not leaving the carbon emissions issue to the International Civil Aviation Organization (ICAO) to come up with a global procedure (instead of the EU going ahead on its own to introduce the carbon emissions trading scheme in this specific case), this may be an opportunity for international aviation agencies to not later regret being sidelined.