Europe Suspends Unilateral Airline Carbon Fee Scheme, Awaits a Global Deal

By Patrick Goodenough | November 13, 2012 | 4:54am EST

Under the now-suspended European Union scheme, all airlines entering E.U. airspace were charged a fee for CO2 emissions, calculated over the duration of the entire flight. (AP Photo/Ted S. Warren)

( – In a temporary admission of defeat in the face of strong opposition from the U.S. and elsewhere, the European Union announced Monday it will delay a plan to charge foreign airlines for “greenhouse gases” emitted during flights to and from European airspace, a move critics labeled a breach of U.S. sovereignty.

The E.U. is not scrapping the cap-and-trade scheme, however. Instead it is giving the United Nations’ aviation body, the International Civil Aviation Organization (ICAO), a year to hammer out a global agreement on dealing with the aviation sector’s carbon dioxide emissions, the main greenhouse gas blamed for climate change.

The decision was announced by E.U. climate commissioner Connie Hedegaard, who stressed that if the ICAO does not reach an agreement by the time it holds its general assembly next fall, the aviation requirements under the E.U. emission trading scheme (ETS) would resume.

“’Stopping the clock’ creates space for the political negotiations and demonstrates confidence on the side of the E.U. that together with international partners we will succeed in ICAO to agree on meaningful international action,” she said in a statement.

“But let me be very clear: If this exercise does not deliver – and I hope it does – then needless to say we are back to where we are today with the EU ETS. Automatically.”

Hedegaard’s decision followed a meeting in Canada of the ICAO’s 36-member council on Friday which saw some progress reported in a long-running effort to reach a global agreement, first called for under the 1997 Kyoto Protocol.

Crucially, the council meeting recognized the technical feasibility of a global “market-based measure” (MBM) to reduce greenhouse gas emissions from international aviation.

Under the now-suspended scheme, all airlines entering European airspace were charged a fee for CO2 emissions, calculated not just while the aircraft was over Europe but over the duration of the entire flight.

The move drew strong opposition from the U.S. as well as other countries affected, including China, India, Russia, Japan and Canada. A legal challenge initiated by U.S. airlines in 2009 ended up in the European Court of Justice, Europe’s highest court, which ruled last December that U.S. airlines must comply.

Last September the U.S. Senate passed a bill preventing American carriers from participating in the ETS, following a similar measure passed in the House in October 2011.

Sen. John Thune (R-S.D.), who sponsored by bipartisan Senate legislation, welcomed Monday’s E.U. decision, but with reservations.

“While I am pleased the E.U. has temporarily suspended its efforts to unilaterally impose a tax on our airlines flying over U.S. and international airspace, the E.U.’s announcement does not rule out future efforts to tax foreign carriers,” he noted.

“Further, the E.U.’s announcement still does not recognize that its system is illegal and that a global solution, not just one deemed acceptable by the E.U., must be the path forward.”

Looking to Obama

U.S. environmentalists supportive of a global MBM on aviation emissions are looking to the newly-re-elected President Obama to lead the way.

“To a large extent, the U.S. holds the key to real progress on an market-based measure now,” said Annie Petsonk of the Environmental Defense Fund, “and this will be the first opportunity for Obama to show that he means what he said in his victory speech: ‘We want our children to live in an America that … isn’t threatened by the destructive power of a warming planet.’”

The Environmental Defense Fund was one of six green advocacy groups that were permitted to intervene in the European Court of Justice case that ruled against the U.S. airlines.

The decision announced Monday will not let European airlines off the hook for flights within the E.U., which will continue to be charged for CO2 emissions.

In its response the Association of European Airlines (AEA) – whose members include KLM, British Airways and Air France – said this means “passengers on these flights will effectively be taxed, purportedly for environmental reasons, whereas their counterparts in the rest of the world are not.”

“This is clearly an unsatisfactory situation in anything but the shortest term,” added the AEA’s acting secretary-general, Athar Husain Khan.

Still, European airlines have faced the prospect of retaliation in global markets over the ETS dispute—including possible landing rights and market access difficulties – and the AEA cautiously welcomed the E.U. moratorium, saying it hoped the move would “stimulate action within the notoriously slow-moving ICAO.”

“In their opposition to EU ETS, countries such as the U.S.A., Russia, China and India have repeatedly stated that the issue should be dealt with in ICAO,” said Khan. “Now they have the chance to show that they mean it.”

Also welcoming the “pragmatic” E.U. decision was the International Air Transport Association (IATA), which represents some 230 airlines accounting for 93 percent of scheduled international air traffic.

The IATA opposes the ETS and was a party to the U.S. airlines’ earlier legal challenge. It has calculated that the European scheme more than one billion dollars a year at the outset, climbing to $3.63 billion in 2020.

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