EC Advances Unifying Skies, Capping Emissions - 2008-07-01

Europe last week took two steps toward greening its skies, as it made further strides in singularizing air traffic infrastructure and followed through on its plan to cap airline emissions beginning in 2012. Though the international aviation community applauded the European Commission's second package proposal for a "Single European Sky"—updated from 2004 regulations—airline organizations were less than pleased with Europe advancing a cap-and-trade plan.

Opponents said the cap-and-trade plan would invite international lawsuits and add costs to flying, while proponents of the trading plan said it would reduce airline emissions.

Applicable to all flights touching down or originating in Europe, the newest version of the cap-and-trade plan lowered the cap for the aviation sector to 97 percent of the average annual CO₂ emissions the industry contributed to the atmosphere between 2004 and 2006 for the first year, and 95 percent of those emissions for 2013 onward. The EU plans to allow carriers to auction 15 percent of its emission allowances. The EU Emissions Trading Plan for airlines still requires legislative endorsement during a vote on July 9.

Components of the proposal—including the start date, the percentage of capped emissions and whether operators based outside of the EU will be included—have been modified several times since the European Commission first proposed capping the airline sector in late 2006.

Earlier versions placed Europe-based carriers under the system in 2011, and carriers from other countries would need to comply by 2012. The latest version places all carriers serving European markets under the plan beginning in 2012. Peter Liese, European Parliament rapporteur on emissions, said, "Of course, a global agreement is our final goal, but the inclusion of third country flights starting and landing in Europe is a major step for the global fight against climate change." That would require new agreements with other countries, including a revised bilateral with the United States.

The U.S.-based Air Transport Association said the cap-and-trade plan is "bad policy, particularly in light of the devastating effects high fuel prices already are having on the industry. As numerous countries have pointed out, it is a clear violation of international law. We hope the European legislature will think twice about this in the final vote that is expected soon. Otherwise, we would expect that this matter will be heading to the courts."

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

Bisignani argued that "reducing emissions is more effective than charging for them," noting airlines already are on that track to cope with astounding fuel bills. "To survive the oil crisis, airlines are already doing everything possible to save fuel and reduce emissions. So there is no additional incentive," he said. "Already over 130 countries have vowed to oppose it. And it puts 7.6 million aviation-related European jobs at risk with higher costs."

JP Morgan European Equity Research airline analyst Chris Avery in a research note released in March said the Chicago Convention of 1944 "specifically forbids unilateral moves that interfere with these mutually agreed rights," noting that opposition of the emissions trading plan has come several sources, from the U.S. Federal Aviation Administration to Latin American aviation authorities.

However, Avery noted, "Such objections notwithstanding, we do not expect the EU to retreat from its intent to require emissions permits for almost all flights using European airports. It is not clear that other trading partners have either the ability or the willingness to retaliate against the EU initiative. We also think that many international carriers will not be willing to oppose the EU plan, at least publicly, for fear of alienating environmentally conscious customers."

Among policies that IATA and ATA endorsed, singularizing the air traffic control system throughout the European Union also took a step forward last week, as the EC endorsed upgrades to the region's air traffic control system with the "aim to further improve safety, cut costs and reduce delays," and also trim emissions by scaling back flight lengths and reducing delays.

The latest proposal updates the existing "Single European Sky" package from 2004, setting new performance targets for "air navigation service providers," establishing "a European network management function to ensure convergence between national networks" and developing a "new generation, Europe-wide air traffic management system." The EC said the efficiencies could reduce emissions by up to 10 percent per flight, though those gains may not take hold until after 2012.

IATA applauded the move as a step in the right direction, "but we have a lot of ground to cover before a Single European Sky can become a reality," Bisignani said. "I urge Europe's national governments to put aside local politics and focus on what is best for Europe and for the environment. That is a Single European Sky with the ambitious objective of a 10 percent improvement in carbon emissions and fuel savings. After decades of discussion, it's time for success."