European Union to Include Airlines in Pollution Allowances Trading Program in 2011

Airlines that fly within the European Union will have to trade pollution allowances beginning in 2011, the European Commission said Wednesday, which could see travelers pay more for popular short-break trips.

BRUSSELS, Belgium — Airlines that fly within the European Union will have to trade pollution allowances beginning in 2011, the European Commission said Wednesday, which could see travelers pay more for popular short-break trips.

Expanded rules covering all airlines that fly into the EU will take effect the next year, a move that would hit U.S. airlines on their lucrative trans-Atlantic routes.

It also angered U.S. officials. The U.S. mission to the EU warned that the "non-consensual" inclusion of foreign airlines could break international aviation laws and "will undermine rather than support international efforts" to limit carbon dioxide emissions from aircraft.

European airlines are generally in favor of the plan, since EU officials had warned them that refusing to back an emissions trading program would result in an aviation tax.

"EU emissions from international air transport are increasing faster than from any other sector," the Commission said. "This growth threatens to undermine the EU's progress in cutting overall greenhouse gas emissions."

The plan could add between 1.80 euros and 9 euros (about $2.40 to $11.80) to a typical return flight within Europe with higher price hikes for long-haul trips. The Commission claimed these would be "significantly lower" than oil price increases passed on to travelers.

Bowing to pressure from trade partners, the EU's executive arm will give all flights to and from EU airports another year to join the program.

All airlines -- based in the EU or elsewhere -- will have to trade carbon dioxide allowances beginning in 2012 for all flights to and from European airports, it said.

This will break international aviation law, said U.S. spokesman Robert Gianfranceschi. "The inclusion of non-EU airlines on a non-consensual basis runs counter to EU member states' legal obligations under the Chicago convention on international civil aviation and their bilateral air transport agreements, including with the U.S.," he said.

The EU's refusal to wait for the International Civil Aviation Organization to set up a global program "will prove unworkable," he said, calling on EU governments -- who must approve the plan -- to insist that it not be implemented without international backing.

The Air Transport Association of America, a trade group representing U.S. airlines, said it was disappointed by the commission's "misguided decision." The EU should work through the ICAO, the group said, which is "working on appropriate multilateral solutions" to the greenhouse gas issue.

"The EU is alone in its efforts to bypass that ongoing work," the ATA said in a prepared statement.

ATA's members include American Airlines Inc., Southwest Airlines Co., Delta Air Lines Inc., Northwest Airlines Inc. and United Airlines Inc., among others.

But EU Environment Commissioner Stavros Dimas insisted that the plan was in line with international law, adding that he did not believe U.S. airlines would win a challenge to it. He called on their "moral obligation" to fight climate change.

"We need to act globally. We need to have the United States on board," Dimas told reporters. "It's a global problem. It needs a global solution."

He said Europe had to push ahead because international efforts were moving too slowly.

The program gives airlines a financial incentive to reduce emissions because they can sell allowances that they don't use. But if they fail to convert to low-carbon technology or increase their flights, they will be forced to buy additional allowances to release more carbon dioxide.

The EU said aircraft emissions make up 3 percent of total greenhouse gas emissions -- higher than any other industry -- but are increasing as cheap flights multiply and would likely double by 2020.

"Without action, the growth in emissions from flights from EU airports will by 2012 cancel out more than a quarter of the 8 percent emission reduction the EU must achieve to reach its Kyoto Protocol target," it said.

Someone flying from London to New York and back generates about the same level of emissions as the average person in the EU does by heating their home for a year, the Commission said.

Emissions will be capped at the average from 2004 to 2006, it said. Some allowances will be auctioned by national governments but most will be given away.

Airlines can trade carbon permits with other fuel-hungry industries such as power generators and steelmakers, increasing competition for a finite number of permits.

Scandinavian airline operator SAS AB said carbon trading was the best option because it did not punish economic growth. But it said it would have preferred to start with a global plan "in environmental terms and from a competitive perspective."

The Association of European Airlines, which represents Air France SA and British Airways PLC, backed emissions trading but warned that a poorly designed program could strip airlines of the funds they need to introduce cleaner technology. The International Air Transport Association also gave it a "cautious welcome."

But environmentalists claimed the EU plan was too weak, citing a report from the British think tank, the Institute for Public Policy Research, that said airlines could make up to 2.7 billion pounds (euro4 billion; US$5.26 billion) in profit because they will get emissions allowances for free and pass on the costs in higher ticket prices.

One group, Transport and Environment, said the plan would barely reduce overall emissions and more measures were needed such as a tax on fuel and sales tax on tickets.

The EU says it will, by the end of 2008, suggest trading another greenhouse gas released by airlines: nitrogen dioxide.

EU governments and the Parliament must back the proposal -- and can make changes -- before it enters into force.

Source: Associated Press

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