Bridges Weekly Trade News DigestVolume 16Number 39 • 14th November 2012

European Commission Announces Temporary Suspension of Aviation Emissions Law

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The European Commission has announced that it plans to temporarily “stop the clock” for one year on enforcing the inclusion of aviation into its Emissions Trading System (ETS) for flights to and from non-European countries. The proposed suspension - announced by EU Commissioner for Climate Action Connie Hedegaard on Monday morning - came just days after a meeting of the International Civil Aviation Organization (ICAO) that saw signs of movement toward a possible deal on global aviation emissions.

Suspension details

Under the current EU scheme, airlines landing in or taking off from any of the EU’s 27 member states - as well as Iceland, Liechtenstein, and Norway - must surrender carbon permits for the emissions they produce. The aviation component of the ETS took effect on 1 January of this year, and requires airlines to buy permits for 15 percent of those carbon emissions, with the remaining 85 percent initially being provided to them for free. Carriers had originally been told that they would need to purchase and surrender these permits by 30 April 2013.

In effect, the one-year suspension announced on Monday means that the EU will no longer require that allowances be surrendered next April for the emissions from flights from or to non-EU countries during the year 2012. The monitoring and reporting obligations for these same flights will also be deferred for one year, according to the Commission.

While the requirement to purchase and surrender permits for non-EU flights is now on hold, the legislation still applies to all intra-EU flights, regardless of airline, according to the Commission.

Move follows progress at ICAO Council meeting

The EU has long pushed for a global aviation emissions deal, but decided to incorporate aviation into its ETS after deeming that the decade-long discussions at the ICAO - the UN’s civil aviation body - had been moving too slowly. However, Hedegaard told reporters on Monday, a global deal on aviation emissions has always been the 27-member EU bloc’s top priority.

“The European Union has been very clear: nobody wants an international framework on aviation more than we do,” she said. “Now it seems that because of some countries’ dislike of our scheme, many countries are prepared to move in [the International Civil Aviation Organization], and even to move towards a market-based mechanism at a global level.”

Following their meeting in Montreal last week, the ICAO’s governing council agreed on Friday to establish a high-level policy group on market-based mechanisms (MBMs). The ICAO Council also agreed that the current options being discussed on regulatory market-based mechanisms will have to be reduced from the present three alternatives to one by the UN aviation body’s General Assembly in autumn of next year. There is also, according to Hedegaard, an explicit reference in the Council’s conclusions to the global market-based mechanism “that the world now needs to agree on.”

“We think that now - for the first time in years, it seems - that a global deal on aviation should be within our reach. We must use that opportunity,” Hedegaard explained on Monday, while acknowledging that difficult negotiations still lie ahead and that there are no guarantees of success in ICAO.

With that in mind, the climate commissioner warned that the EU would go back to enforcing the aviation component of its emissions scheme if the ICAO General Assembly in autumn 2013 fails to deliver on a global deal. “Let me also be very clear: if this exercise ends in nothing, then needless to say we are back to exactly where we are today with the EU ETS. And we are back there automatically,” she told reporters.

Some environmental groups, meanwhile, have met the results from last week’s ICAO meeting with a cautious - though optimistic - response. “”After 15 years of ICAO inaction, it’s crystal clear now that a global market-based measure for the aviation sector is simply a question of political will,” Bill Hemmings of Transport & Environment, a Brussels-based NGO, said in a statement. “These are critical times and the world can no longer wait.”

“Similar and rapid effort is now required to resolve the political questions in a spirit of fairness and equity while remembering that addressing aviation’s climate change impacts is a necessity. Everyone says a global approach is the way to go - now it’s time to match these words with deeds,” Johnson added.

“Freeze” of aviation rule still requires approval by Council, Parliament

The move must still undergo a few more steps before taking effect, Hedegaard told journalists on Monday. While the EU’s 27 member states have been informed of the Commission’s plan, the suspension must still be endorsed by the European Parliament and the European Council - a process known as co-decision - before becoming formalised.

“This is politically what I recommend that we do, and I of course would not say this if I did not think that also we could get the [necessary] backing,” she said.

So far, members of the European Parliament’s Environment, Public Health, and Food Safety Committee - meeting with Hedegaard in an extraordinary session on Monday afternoon to discuss the ETS - have expressed a cautious welcome to the Commission proposal.

“I welcome the substantial progress under ICAO that shows that it was very important that the European Union took a firm stand,” said Member of the European Parliament (MEP) Peter Liese.

“Now it is clear that we need to be flexible. But we have to look at the Commission proposal very carefully. On the one hand we shouldn’t be too generous. On the other hand we should avoid distortion of competition as much as possible.”

Response from non-EU government officials, aviation industry

The original decision to include aviation in the EU ETS from 1 January of this year had prompted substantial pushback from a wide range of countries - including the US, China, India, and Russia, among others - who argued that Brussels was exceeding its authority by charging for emissions produced outside EU airspace. China and India eventually banned their airlines from participating in the scheme without government approval.

Chinese officials were among those to welcome the European Commission’s announcement, with some officials - such as Li Gao, deputy director-general of climate change at the National Development and Reform Commission, calling the move “a step in the right direction” and arguing that the Brussels decision is a sign that “unilateral measures are not a good way to deal with climate change issues.” Hong Lei, a spokesman for the Chinese Foreign Ministry, has said that Beijing is ready to continue work on the subject on a multilateral level.

Despite the suspension, the US House of Representatives yesterday passed a bill aimed at shielding US airlines from having to comply with the EU aviation rule. “We are notifying the EU that we are not going to support the scheme, and in fact we want a … long-term solution, but we will not allow the United States to be held hostage,” said Representative John Mica, a Republican who chairs the House Transportation and Infrastructure committee, in comments reported by Reuters.

The legislation - which would allow the US Transportation Secretary to stop airlines from participating in the EU ETS if he deems it necessary - mirrors a bill passed earlier this year by Congress’ other chamber, the Senate; the legislation still requires presidential approval, however, before it can become law. (See Bridges Weekly, 26 September 2012) While Obama administration officials have been critical of the inclusion of aviation in the EU ETS, the White House has not yet indicated whether it would approve legislation that could bar US airlines from complying.

With the upcoming United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) in Doha just weeks away, observers will be watching to see whether the EU move will help ease tensions with its trading partners ahead of the annual climate change negotiations.

Airline industry officials had also argued against including aviation in the EU emissions scheme, citing fears that it could spark a global trade war with devastating effects on aviation-related jobs and revenue. Brussels, however, had always maintained that it would only consider abandoning the requirement should there be signs of a global framework emerging under the UN, and would not bow down to pressure from its opponents.

“Commissioner Connie Hedegaard’s announcement that she has ‘stopped the clock’ on the imposition of the EU ETS on flights to and from non-EU countries represents a significant step in the right direction and creates an opportunity for the international community,” said Tony Tyler, the Director General and CEO of the International Air Transport Association (IATA), which represents over 200 airlines.

Commission proposes plan to boost carbon prices

Also on Monday, the Commission submitted to the EU Climate Change Committee a draft proposal to “backload” - in other words, delay the availability of - carbon permits in the ETS, in an effort to boost dangerously low carbon prices. The fall in market prices has primarily been blamed on an excess supply of carbon permits, along with the EU’s broader economic struggles.

Under the proposal, the auctioning of 900 million carbon allowances from 2013-2015 would be postponed to later in the EU ETS’ “third phase,” which is due to end in 2020. Commission officials have stressed that the overall volume of allowances auctioned in the third ETS phase will not change - just when they are distributed.

At Monday’s meeting of the European Parliament environment committee, MEPs expressed some reservations to the Commission’s plan, citing concerns that the backloading proposal might not be enough to prop up lagging carbon prices.

“Backloading the release of allowances will only buy time,” Mathias Groote - the MEP who serves as rapporteur for the proposal - said in response to the suggestion. “We need to take account of all the concerns and doubts that have been raised.”

ICTSD reporting; “Deal on Aviation Emissions Within Reach in 2013, EU Says,” BLOOMBERG BUSINESSWEEK, 12 November 2012; “EU puts airline emissions rule on hold,” CHINA DAILY, 13 November 2012; “U.S. House OKs bill to shield airlines from EU carbon fees,” REUTERS, 13 November 2012.

2 responses to “European Commission Announces Temporary Suspension of Aviation Emissions Law”

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