High noon in airline carbon market row

COUNTRIES from the US to Russia and the European Union (EU) yesterday started the final showdown over a first commitment to design an emissions-reduction market tool for the global $708bn airline industry, even as an amendment sought by African states threatened to “unravel the package”.

Negotiators from more than 190 countries in the United Nations’ International Civil Aviation Organisation (ICAO) are to decide this week whether to back a pledge on a marketbased measure for the sector, which is responsible for about 2% of greenhouse gases.

Details of the programme, a precedent for a single industry worldwide, would be decided in 2016 and the market would start by 2020.

In exchange, the EU will narrow the emissions-trading system’s scope, limiting carbon curbs on carriers to its own airspace and cutting compliance costs for airlines including Delta Air Lines and Aeroflot. That would help avoid tensions with non-EU nations and a trade war with China, where Airbus SAS said orders for its jetliners remained in limbo as part of a government campaign against the EU’s unilateral emissions measure.

“If approved, it’ll be the first signal for airlines and investors that industry accepts the need for market solutions,” said Bill Hemmings, manager at the Transport and Environment lobby in Brussels.

“Whether a global deal can be effective in reducing emissions depends entirely on the details yet to be worked out.”

The talks come the same week as the UN’s Intergovernmental Panel on Climate Change releases its latest report on global warming, in Stockholm on Friday.

Support for the draft ICAO agreement “should not be taken for granted” as some countries are seeking to weaken the deal, according to the EU. A potential debate about linking the continuation of the EU carbon programme in its own airspace with exemptions for some developing nations, a solution sought by African states, could “unravel the package”, it said.

Countries including Brazil, Russia, India, China, Cuba and Saudi Arabia are against national or regional carbon markets before a global deal is enacted, according to the EU.

It is crucial for Europe to win ICAO approval for the continuation of the bloc’s carbon programme in its own airspace.

The EU decided in 2008 that airlines flying to and from European airports be included in its carbon market after aviation emissions in the region doubled over two decades. That triggered protests from the US, where President Barack Obama signed a bill shielding carriers from the EU measure, to Russia, which said last year it considered limits on European flights over Siberia as part of possible retaliatory measures.

To facilitate talks and avoid trade conflicts, the European Commission in November proposed to defer curbs on foreign flights, which were originally subject to EU emission rules at their entire length. The amendment, known as the “Stop the Clock” proposal, entered into force in April this year.

The European Parliament, whose consent will be needed to modify the bloc’s emissions law, is unlikely to do that if the draft ICAO deal is weakened, according to Peter Liese, a German member of the assembly. “I am optimistic about the outcome. The alternatives are unconditional surrender or unconditional trade war.”

The EU cap-and-trade programme is the cornerstone of the region’s plan to cut greenhouse gases that scientists blame for global warming. It imposes pollution limits on about 12,000 manufacturers and power companies, leading to a cap in 2020 that will be 21% below 2005 discharges.

The annual limit for the aviation industry began at 97% of average discharges from 2004 to 2006, falling to 95% this year. Airlines were given emission permits making up 85% of the industry cap for free. EU emission permits for delivery this year traded at ¤5.49/t, or 1.1% higher, yesterday.

A worldwide market-based tool will help the aviation industry meet its 2020 target of carbon-neutral growth, according to the International Air Transport Association. The industry’s estimated revenue will be $708bn this year with an operating profit of $22.4bn, giving a margin of just 3.2%.

Without a global accord the industry risks the proliferation of regional programmes, which could lead to “a whole lot of overlapping, duplicating, sometimes conflicting schemes”, the association’s CEO Tony Tyler has said.