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Battle of the skies

Christian Carey

Readinch

As Europe’s leaders wait for one court ruling on plans to tackle emissions from planes, China is gearing up to launch a fresh round of legal action. Christian Carey explains why the EU is fighting on.

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The European Union is embroiled in a legal battle it can’t afford to lose without weakening a key pillar of its energy policy and undermining its leadership position in global climate-change negotiations.

If all goes to plan, from January 1 next year the carbon emissions of flights operated by all airlines which take off or land within the EU will be included in the region’s Emissions Trading Scheme (ETS). But airline companies and non-EU governments are doing their best to block the changes, which they argue violate international law.

Yesterday, 26 countries outside the European Union were due to file a formal rebuff of the plans with the International Civil Aviation Organization. Meanwhile, a judgment is expected early in the new year from the European Court of Justice in a case brought against the EU by north American carriers. And China has stepped up the rhetoric about its own plans to initiate “legal action”, which it says will happen before the end of the year, though what form that will take is unclear. It has also stopped the sale of 10 European-manufactured Airbus A380s to Hong Kong airlines. (See chinadialogue’s roundtable of expert views from China for more)

With so much at stake, it is worth taking a closer look at what the EU is trying to do and why it has caused so much controversy. The obvious question to ask is: why is the EU waging this battle?

Incentives

Air travel currently contributes only 2% to 3% of man-made greenhouse-gas emissions globally, but this proportion is expected to rise as demand increases and other sectors, such as the energy industry, take action to reduce their carbon footprints. The aviation industry has long focused on reducing fuel burn, originally with a view to increasing operating range, more recently as a cost-reduction strategy and, finally, in an effort to reduce greenhouse-gas emissions. 

The improvements have mainly been technological, but the current system is considered mature, which limits opportunities for further incremental improvements. More dramatic changes, such as open-rotor systems and blended wing bodies – a flying wing design – are both challenging and expensive to develop, issues compounded by the risk-adverse nature of the aviation industry. 

Another factor is the limited impact that new systems have on the existing fleet, because the operational lifetimes of aircraft are so long. Premier airlines may replace aircraft relatively frequently, but low-value operators often use planes that are 15 to 20 years old. This results in the civil aviation fleet having a technology level some 15 years behind the current standard. It is in light of these challenges that the European Union has seen fit to include aviation in the ETS, to help to provide an incentive for the industry to address climate change in its business practices.

The EU ETS is a “cap-and-trade” system. It forms a major part of the European Union’s climate policy in its efforts to reduce greenhouse-gas emissions by at least 80% below 1990 levels by 2050. Currently, it covers firms in the energy and industrial sectors which have a net heat use of 20 megawatts or more. These firms comprise some 10,000 individual units, accounting for 40% of the total greenhouse-gas emissions from the European Union. 

Cap-and-trade systems are a market-based approach to limiting pollution. They operate by a central authority, usually a governmental body but in this case the European Union, limiting the amount of emissions a given sector can produce. The total amount is then allocated or auctioned to individual emitters in the form of permits, which must be surrendered on use. Excess permits can be traded to firms that are unwilling or unable to reduce emissions. 

In theory, this scheme allows for the most cost-efficient method of reducing emissions, as those firms that can lower emissions cheaply will do so, releasing permits onto the market. Cap-and-trade is particularly suited to pollutants that have little or no effect at the point of emissions but are felt uniformly, such as greenhouse-gas emissions.

The success of such programmes hinges on the establishment of a relatively stable permit price, giving firms an incentive to invest in emission reduction. The scheme for aviation requires all operators, both EU and non-EU, to allocate permits – and therefore charges – to the whole of any journey that starts or ends in the European Union. In order to reduce emissions, the cap is set at 97% of greenhouse-gas emissions from a 2004 to 2006 baseline, and is due to be reduced to 95% by 2014. 

Fierce reaction

So why has this plan provoked such a fierce reaction? Opposition to the scheme comes from both those with a stake in the aviation sector and non-EU governments. Opponents focus on the effect on EU competitiveness and on the legality of imposing the scheme on non-EU airline operators. The airlines argue that, by imposing extra costs on them, the ETS has the potential to decrease profitability of the sector, damaging competitiveness. It is expected that a significant percentage of the cost increases will be passed to the consumer, reducing demand and possibly impacting service levels, with some of the less profitable routes being withdrawn. 

Studies suggest low-cost airlines could be hit hardest, as the increased cost will be a greater proportion of their ticket price. Also, as the scheme has no set EU-wide allocation method, it could cause distortion between EU-based airlines, as different countries may allocate more free permits than others.

Competition between EU and non-EU airlines is also a point of concern, as non-EU airlines can avoid operating within the geographical area where the scheme is applied. However the impact of this is expected to be minimal as the expected cost increase is low, landing rights are country-specific and time-consuming to arrange and the current code-sharing “hub-and-spoke” business model (where traffic moves along “spokes” connected to a central hub) would be challenging to operate by abandoning EU airspace. There are also concerns regarding how the charges collected will be spent, as there is no requirement for the funds to be kept in the aviation sector.

The key political argument against EU-ETS, which is yet to be settled, is the legality of the action. Opponents have claimed that the inclusion of aviation in the ETS contravenes customary international law and various international agreements. They argue that the allocation of permits for journeys outside the EU’s jurisdiction (including over the high seas) contravenes: the customary international laws of the sovereignty of states over their own airspace; the right to fly over and the invalidity of claims of sovereignty over the high seas; the Chicago Convention, an international agreement which establishes the rules of airspace and international aviation; the Kyoto Protocol, an international treaty on climate-change mitigation; and the Open Skies Agreement, which is an international policy on liberalised aviation markets. 

Opponents of the scheme claim that EU-ETS breaches three articles of the Chicago Convention: article 1, pertaining to the sovereignty of every state to its own airspace, in that it require permits for airspace outside of the EU; and articles 15 and 24, which limit the ability of a country to tax or charge airlines of another country of the Chicago Convention. Under the Kyoto Protocol, developing nations including China are exempt from legally binding obligations to reduce emissions, which would include airlines operating from such countries. And EU-ETS breaches articles 7 (application of laws) and 15 (mitigation of impact of environmental protection measures) of the Open Skies Agreement

Beyond the judgment

The European Union’s hopes of success were given a boost in October, when a legal opinion by the Advocate General of the European Court of Justice stated that the inclusion of international aviation into the EU-ETS is compatible with international law. This announcement is not binding and the judges will give their judgment at a later date, though the judgment often follows the opinion. 

But what does this mean? If the judgment finds in favour of the EU, the inclusion of aviation of EU-ETS will occur on January 1, 2012, and will likely lead to retaliatory actions by non-EU governments. This could range from condemnation to sanctions, both political and economic, such as cancelling orders of aircraft from French-owned Airbus  or applying charges or taxes on EU airlines, such as Russia’s threat to double over-flight charges.

Were the EU to lose the case there would be two main implications. Firstly, a key pillar of EU energy policy would be weakened as EU-ETS would be found to contravene international law, making it less applicable as a greenhouse-gas mitigation scheme. Secondly, the EU's attempt at  leadership in international climate change negotiations would be undermined by the failure of its flagship programme. Either way, the row looks set to continue for some time to come.

Christian Carey is aviation expert at Oxford University’s Smith School of Enterprise and the Environment.

Homepage image by Foto Jenny

For more on the aviation row, and the opinions of a roundtable of Chinese experts, read "The view from Chinese airspace".

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文章指出:(中国)已经阻止了把欧洲10国制造的空客A380卖给香港航空。这不是真的。从来就没有为巴黎航空展而购买空客A380的计划。一些航空公司发布的恶意报道和大肆宣传想把此事坐实。事实上,在这些“禁令”被报道出来的之后几天,中国航空就同意购买88架空客了:http://english.peopledaily.com.cn/90001/90778/90861/7424817.html.

在欧盟有太多的虚假消息,于是我在我的“留言终结者”里做了下集中:http://switchboard.nrdc.org/blogs/jschmidt/top_myths_about_the_european_e.html

通过新闻发布的方式做出法律声明是件简单的事情。把其变为真实的法律诉讼可能会导致贸易争端,这就是另外一件事了。如果欧盟在值一千美金单程票上最多增加2-8美金,如此小的差别会使得一些国家将不允许他们的飞机降落在欧盟的机场,对此我表示怀疑。特别是这些航空公司完全有避免此价格的选择:采取行动。

Correcting some misinformation

The article claims that: [China] has also stopped the sale of 10 European-manufactured Airbus A380s to Hong Kong airlines. That is actually not true. The plans to buy the A380s was never scheduled for the Paris air show. Some bad reporting and hyping from some airline industries attempted to turn this into a story. In fact, a couple of days after this reported "banning" took place Chinese airlines agreed to purchase 88 Airbus planes: http://english.peopledaily.com.cn/90001/90778/90861/7424817.html.

There are large number of myths circulating around the EU program so I pulled together my "myth buster": http://switchboard.nrdc.org/blogs/jschmidt/top_myths_about_the_european_e.html

Making claims of legal challenges in a press statement is easy. Turning them into a real legal challenge which might lead to a trade dispute is another story. Given that the EU program will mean maximum price increases of around $2-8 each way on a thousand dollar ticket I find it doubtful that a country would really risk having their planes not allowed at EU airports over such a small difference. Especially since the airlines have a choice to avoid the price completely: take action.


支持欧盟,但欧盟需要更多外交咨询

同意作者的观点。除却购买碳排放限额的直接成本,这个政策将对贫穷国家增加巨额管理成本以及核查负担。我的问题是:这个政策真的是遏制航空业碳排放的最佳手段么?对于欧盟航空来说,答案或许为“是”。因为技术机构已经积累了数年的经验,他们随时可以准备开始。但对于贫穷国家,“否”。与有限减排目标相比,这个额外负担显得十分沉重。不幸的是,这就是人生。

Support EU, but EU needs more diplomatic consultation

Agree with the author. Besides direct cost of buying emission allowance, the policy will add huge administrative and verification burden to poor countries. My question is: is this policy really a best instrument to curb aviation emissions? Probably yes for EU airlines because the technical institutions are ready to run for they have years of experiences. But for poorer countries, No. Huge extra burden in comparison to the limited emission reduction goals...unfortunately. This is life....


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