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By Karen E. Thuermer

Published in Air Freight Management, October 2012

As if the continuing global recession is not enough to create havoc within the air cargo industry, the issue on how to address environmental sustainability has resulted in an ugly debate.
At the heart of the matter is European Union legislation that incorporated aviation into the European Union Emissions Trading Scheme (EU ETS), effective Jan. 1, 2012.
The EU ETS was launched in 2005 to combat climate change. A major pillar of EU climate policy, the EU ETS is the first large emissions trading scheme in the world.
According to the ETS, airline emissions will be capped at 97% of their average 2004-2006 levels in 2012 and at 95% from 2013. Airlines will receive 85% of their emissions allowance for free in 2012 and will have to buy, at auction, the other 15%. This reduces to 82% for 2013-2020. Another 15% of allowances will be auctioned each year.
From 2013, the remaining 3% of allowances will be allocated to a special reserve for distribution to fast growing airlines (such as those from emerging economies) and new entrants to the market. Allowances can be bought and sold across the European Union. Airlines can buy credits from other industries but can only sell to other airlines.
The legal validity of the EU ETS has been challenged by Airlines for America (A4A), formerly known as the Air Transport Association of America. Its challenge is supported by the International Air Transport Association (IATA) and the National Airlines Council of Canada (NACC).
A4A reports that its members are complying “under protest” with the EU ETS.
“We still believe the EU ETS violates international law, including the sovereignty of the United States and imposes an illegal, exorbitant and counterproductive tax on U.S. citizens, diverting U.S. dollars and threatening thousands upon thousands of jobs,” A4A wrote in a statement.
A4A contended that none of the monies collected by the Europeans are required to be used for environmental purposes. “By contrast, the initiatives that the U.S. airlines are undertaking are resulting in real environmental improvements,” it stated.
In June, IATA, which represents 240 airlines worldwide, reiterated its call for the EU to drop its “unilateral and extra-territorial” scheme. Tony Tyler, IATA Director General and CEO, criticized the EU ETS as not being “a stepping stone” to meeting global environmental targets, but rather a “polarizing obstacle that is preventing real progress.”
He suggested that a global solution, negotiated through the International Civil Aviation Organization (ICAO), be agreed upon in 2013, and states that such proposals exist today.
At the heart of the opposition is the fact the EU levy on airlines is calculated based on carbon emissions for entire flights, not just the travel over Europe. The majority of airlines with operations to, from and within the EU are now required to monitor and report their emissions and to surrender emission allowances for any flights to and from EU airports.
Meanwhile, airlines in more than 20 countries, including the United States, China, Russia and Japan, have submitted their required baseline emissions data by the March 31, 2011 deadline. Eight Chinese and two India carriers did not comply, meaning that more than 99 percent of major airlines have complied with the first step of the EU ETS. China forbids its carriers to participate in the scheme.

Opposition Rancor

U.S. opponents did file a lawsuit disputing the inclusion of U.S. airlines in ETS. They cited that the ETS violated well established principles of customary international law by applying to aviation in third countries’ airspace and over the high seas, the Chicago Convention, the Kyoto Protocol, the EU-US Open Skies Agreement, and that such extra-jurisdictional matters should be regulated by ICAO.
While the lawsuit was dropped in March after a two-year battle against the UK government that was designated a “competent authority” responsible for administering the EU ETS, the A4A continues to dispute the ETS and states that U.S. government opposition “is crucial to bringing the EU back to the global negotiating table.” A4A President and CEO Nicholas Calio further stated that the Obama administration, the U.S. Congress and the world’s governments were now united in their opposition to the application of the EU ETS to international aviation and urged for accelerated work to reverse “this unilateral tax”.
“Our legal action was critical in bringing to light that the EU ETS violates international law and is an exorbitant money grab, which are now key points in the governments’ unified opposition to the scheme. 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,” Mr. Calio said.
A trade war may be brewing over the issue. Russia was the first country to take a shot at the EU aviation emissions scheme. China is in great opposition to the scheme. U.S politicians in the House of Representatives have called on President Obama to take more forceful steps against the EU over the ETS and demanded officials from the State and Transportation departments to formally launch an Article 84 challenge at ICAO.
While EU Climate Action Commissioner Connie Hedegaard has reiterated Europe’s preference for a global agreement through ICAO, she added that it would have to deliver real emissions reductions from the aviation industry and could not be based on voluntary goals.
“Countries have until April 2013, when the first payments are due to the European system, to reach a global compromise,” she added.

Demonstrative Efforts

Meanwhile, efforts are continuing to make aircraft more environmentally sustainable. In 2011, airlines received approval to fly on biofuels. While very small quantities of sustainable aviation biofuel are available to airlines today, groups like the ICAO hope that governments will provide assistance so that producers will be able to deliver the quantities needed at a price comparable to traditional jet fuel, while continuing to meet sustainability criteria.
In June, the ICAO set out to show how biofuels-powered flights could be the norm with the right government assistance. With support from the Air Transport Group (ATAG), ICAO launched a special Rio+20 global initiative dubbed “Flightpath to a Sustainable Future” that consisted of a first-ever series of connecting flights powered by sustainable alternative fuels.
During this first “Flightpath”, ICAO Secretary General Raymond Benjamin traveled from Montréal to Rio de Janeiro for the United Nations Conference on Sustainable Development, known as Rio+20. Airline partners included Porter Airlines, Air Canada, Aeroméxico and GOL, and aircraft partners included Bombardier, Airbus and Boeing.

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