EU To Limit Airlines' Emissions

European Parliament this month officially endorsed a rule to include airlines in January 2012 in the EU Emissions Trading System, a cap-and-trade plan that proponents said will reduce airline emissions but opponents said will invite international lawsuits and add costs to flying.

Applicable to all flights touching down or originating in Europe, the rule will lower the cap for the aviation sector to 97 percent of the average annual greenhouse gas emissions airlines contributed to the atmosphere between 2004 and 2006 for the first year, and 95 percent of those emissions for 2013. The EU plans to auction 15 percent of the airlines' emission allowances, but may raise that percentage after 2013.

"A global agreement is our final goal," said Peter Liese, European Parliament rapporteur on emissions. That would require new agreements with other countries, including a revised bilateral with the United States. To that end, Liese said, "We will have to wait until the U.S. has elected a new president, called John McCain or Barack Obama, who takes climate protection seriously."

International Air Transport Association director general and CEO Giovanni Bisignani blasted the cap-and-trade approach, claiming that it "will only invite international legal battles," while adding new expenses to travel.

James May, president and CEO of the U.S.-based Air Transport Association, said the plan "is not only bad policy, it is illegal. The EU's unilateral grab of power over U.S. and other non-EU airlines is a clear violation of the Chicago Convention. The EU decision to move forward with this legislation is sure to spawn a legal challenge."

IATA's Bisignani argued that "airlines are already doing everything possible to save fuel and reduce emissions, so there is no additional incentive," adding that "over 130 countries have vowed to oppose it, and it puts 7.6 million aviation-related European jobs at risk with higher costs."

The European Commission, however, said carriers are more likely to pass the costs of compliance to travelers, not absorb them. The Commission said roundtrip tickets could increase anywhere from ?4.60 to ?39.60, "depending on the journey length."

Vice president and co-founder of Sustainable Travel International Peter Krahenbuhl said, "There are still some questions regarding the effectiveness of the current system, even prior to the inclusion of the aviation industry. In terms of effectiveness, we couldn't even begin to project that because the devil is in the details."

Among details bedeviling airlines, the legislation said auction revenues "should" be used to fund aircraft research, clean transport options, climate change mitigation and forestation efforts, though member states can determine the use of auction revenues.

IATA called the "should" clause the "weakest possible language. There is no assurance that any of the money will go to environmental programs."

JP Morgan European Equity Research airline analyst Chris Avery in a March research note said, "Many international carriers will not be willing to oppose the EU plan, at least publicly, for fear of alienating environmentally conscious customers."