Sunday, February 26, 2012

Trouble brewing for EU ETS?

Trouble seems to be brewing for the EU ETS scheme regarding allowance of emission of greenhouse gases in the airline industry.The scheme levies a charge on flights landing and taking off in any aerodrome in the European Union based on its carbon emissions.  In a Joint declaration, 26 countries, including India, have condemned this scheme. I had earlier blogged here that China had expressed serious reservation against the scheme.

In the joint declaration signed in Moscow the signatories affirmed:
Considering that the inclusion of international civil aviation in the EU-ETS leads to serious market 
distortions and unfair competition;
Decided to:
a) Adopt this Joint Declaration as a clear manifestation of their unanimous position that the EU and its Member States must cease application of the Directive 2008/101/EC to airlines/ aircraft operators registered in third States;
b) Strongly urge  the EU Member States to work constructively forthwith in ICAO on a multilateral approach to address international civil aviation emissions;
c) Consider  taking actions/ measures set forth in Attachment A to this Joint Declaration including, for example, a proceeding under Article 84 of the Chicago Convention and barring participation by their respective airlines/aircraft operators in the EU ETS;
d) Exchange  information on the measures adopted and to be adopted, particularly to ensure better coordination, by each non-EU Member State after this Meeting in future;
e) Continue their intensified common efforts to make progress at ICAO to address international civil aviation emissions;
f) Request the Russian Federation, on their behalf, to communicate this Joint Declaration to the EU and its Member States; and
g) Invite any other State to associate itself with this Joint Declaration and, in this connection, request the Russian Federation to extend this invitation."
Amongst the basket of measures that were intended to be taken was to assess "whether the EU ETS is consistent with the WTO Agreements and taking appropriate action".

It would be interesting to see if the EU shows sign of being flexible to suspend the operations of the scheme till a consensus is reached. Would the scheme force nations to go for a "global agreement " on emissions in the aviation sector? Would it lead to a retaliatory trade war? Would it lead to a WTO dispute?

An interesting counter-insight is provided in this comment by Jeffrey Gazzard, Board member of the Aviation Environment federation. 
"Time for a reality check to offset the notion that the entire aviation industry is a collection of anti-environment ETS-refuseniks. They aren’t: there are already a significant amount of global airlines in full compliance with the EU Aviation ETS regulations.
In fact, “significant” in this case means 100%, as every single airline that flies in and out of the EU has already registered under every aspect of the ETS with their respective regulator in each EU member state; they have met every deadline along the way; and many are active in carbon markets. They have effectively already surrendered."
Is the opposition only rhetorical with international airlines (except China) falling in line? Another issue that is raised by the opponents of the EU ETS scheme is the unilateral nature of the EU measure that has an international impact. Another thumbs up for the need for multilateralism in trade and issues revolving around them?

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