Bridges Weekly Trade News DigestVolume 16Number 12 • 28th March 2012

India Confirms Boycott of EU Aviation Emissions Rule

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Tensions continue to run high over the inclusion of aviation in the EU’s Emissions Trading System (ETS), after Indian government officials confirmed last Thursday that New Delhi would be asking its airlines not to participate in the scheme. Meanwhile, the trade group representing the largest US airlines is now calling upon the White House to pursue a case against the Brussels plan at the International Civil Aviation Organization.

“Though the European Union has directed Indian carriers to submit emissions details of their aircraft by March 31, 2012, no Indian carrier is submitting them in view of the position of the government,” India civil aviation minister Ajit Singh said. “Hence the imposition of a carbon tax does not arise.”

The move makes India the second country to take concrete action against the inclusion of aviation in the Brussels scheme, with China having earlier banned its own airlines from complying with the EU ETS without government approval.

Beijing has also reportedly halted the orders of US$14 billion worth of jets from Europe’s flagship airplane manufacturer, Airbus, in response to the aviation emissions rule. However, this claim has been contested by China’s aviation regulator, Li Jiaxiang, who indicated in an interview with Bloomberg that the country’s airlines have not been barred from buying Airbus planes.

The US has also warned that it could take “appropriate action” in response to the scheme, but has yet to take any concrete steps. However, Airlines for America - the trade group that had, together with three US airlines, unsuccessfully challenged the legality of including aviation in the scheme at the European Court of Justice - is now calling on the administration of US President Barack Obama to bring a case through the International Civil Aviation Organization (ICAO), the UN civil aviation body.

“There is a clear path for the United States to force the EU to halt the scheme and protect US sovereignty, American consumers, jobs and international law,” said Airlines for America President and CEO Nicholas E. Calio.

The EU rule, which requires airlines to surrender carbon permits for the emissions they produce during all flights taking off or landing in the 27-country bloc, has been criticised by various non-EU governments, which argue that Brussels is exceeding its legal jurisdiction by charging for aviation emissions over an entire flight, rather than just those in EU airspace.

In response to the Brussels plan, over 20 countries - including the US, China, India, and Russia - met in Moscow in February to agree on a basket of possible countermeasures against the inclusion of aviation in the EU scheme (see Bridges Weekly, 22 February 2012). The 22 February announcement on possible countermeasures fed fears that the row could soon escalate into a global trade war.

Under the EU ETS - of which the aviation element entered into force on 1 January - airlines are required to buy permits for 15 percent of the carbon they emit; permits for the remaining 85 percent will be provided to them for free. Carriers will have to surrender permits for 2012 carbon production by 30 April 2013.

Air industry renews call for global scheme

Aviation industry officials from both EU and non-EU countries, meanwhile, are strengthening their push against the Brussels aviation emissions rule, adopting a declaration at the end of a two-day summit in Geneva last week urging governments to use the ICAO to negotiate a global deal on aviation emissions.

At the meeting, South Africa - one of the countries opposing the inclusion of aviation in the scheme - urged Brussels to suspend the aviation component of the scheme for two years, in order to allow time for a global agreement on aviation emissions to be worked out.

“Aggressive unilateralism and extra-territorial measures are not the way to go in an increasingly globalised world,” South African tourism minister Marthinus van Schalkwyk said in outlining the proposal.

The call for additional time - backed by a US government representative and industry bodies from Europe and the Middle East - was echoed by various aviation industry executives, with the chiefs of Airbus and its often-rival Boeing both making similar pleas.

“This is not about Boeing and Airbus; it is about what is best for our customers and how we are going to get the whole industry to reduce its environmental footprint,” Boeing chief executive Jim Albaugh said after the aviation industry meeting.

“Give ICAO time to come up with a global regime. Stop it now, don’t go down the road of a trade war,” Airbus Chief Executive Tom Enders argued.

The EU has said that it would only consider changing its legislation should the 191-member ICAO come up with a sufficiently ambitious global aviation emissions agreement.

The European Commission had originally maintained that it preferred that the Montreal-based organisation be the body responsible for regulating aviation emissions. However, the EU later chose to include aviation in its emissions trading system after it deemed the UN body’s progress to be too slow.

“Fine, let’s create a global scheme, but it cannot take 100 years to get it done this time,” EU Climate Commissioner Connie Hedegaard said on Tuesday.

ICTSD reporting; “South Africa urges EU suspend airline carbon scheme,” REUTERS, 21 March 2012; “UPDATE 4 - India joins China in boycott of EU carbon scheme,” REUTERS, 22 March 2012; “UPDATE 2-Boeing backs rival in EU row, stands firm on WTO,” REUTERS, 22 March 2012; “Global trade war threat as India rejects EU plan,” THE TELEGRAPH, 23 March 2012; “U.S. Airlines Seek Action on EU Carbon Tax,” WALL STREET JOURNAL, 27 March 2012.

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