Tuesday, June 7, 2011

IATA Expresses Concerns Over EU Emission Trading Scheme

Airline Profits Already Hit by Disaster and Political Turmoil
Shipping News Feature

EUROPE / WORLDWIDE – The war of words between the EU and much of the rest of the world, which has seen the dreaded term “trade war” bandied around, continues to rumble on as the European Union’s plans to implement emission trading for the aviation industry next year continue on schedule.

From the 1st of January next year any airline operating in the EU will be required to be a part of the Emission Trading Scheme (ETS) which will force carriers to pay for every tonne of CO2 produced above a fixed limit. The expected cost to the industry has been estimated at around $900m (1 billion euros/ USD$1.46 billion).

This will naturally affect long-haul carriers the most and has engendered a great deal of hostility to the scheme.

Members of both the Chinese and American aviation industry are taking legal action to halt the plans implementation, with Wei Zhenzhong, general secretary of the China Air Transport Association, warning that ETS could lead to a trade war between China and the EU.

However, speaking to the Guardian Newspaper Connie Hedegaard, the European Commissioner for Climate Action, said that the EU was set on pushing through the legislation, saying that:

"This is our legislation, adopted unanimously.

"This is the first time China has mentioned a trade war and retaliation – if Europe immediately back-tracks, what would that look like? If someone says boo, we do not change our laws – that would not be serious."

She also pointed out that under ETS other countries could apply for exemptions for their carriers as long as equivalent carbon trading measures were taken to compensate.

This has not placated all opposition to the scheme.

Today saw the airline industry organisation IATA state that though they still supported the ETS in principle, they had concerns about how any scheme could be enforced rationally.

IATA’s Director for Aviation Environment, Paul Steele, said that:

“The issue about the European Union ETS is not about the ETS as a mechanism, it's about the fact that the EU has probably over extended itself in the way it's trying to impose it.”

He explained that the plans by the European Commission, who will oversee the ETS, lack clarity on what measures would be acceptable as commiserate to being in ETS.

"Our concern from an industry point for view is there doesn't seem to be any accountability mechanism to sign off on what an equivalent measure is, apart from what the Commission decides it is.

"One of the biggest concerns we have right now, that we'll end up with an even greater patch-work of measures."

Instead IATA is calling for a global carbon trading initiative between nations that allows for greater clarity in offsetting schemes and the ‘real-term’ effects of such practices.

IATA’s concerns are compounded by the news that the organisation has recently more than halved their profit forecast for the global industry, citing the catastrophic earthquake and tsunami that struck Japan on the 11th of March this year and continuing unrest in the Arab world for undermining trade and pushing up oil prices.

Originally projected in March to reach $8.6 billion, the announcement on Monday that IATA now thinks worldwide profits may only make $4 billion for 2011 caused some alarm within the industry and observers.

Additional costs to their members, let alone the risk of a trade war between China and the EU, are placing further strains on an aviation industry still recovering from the recession, with IATA’s Director General, Giovanni Bisignani, stating that: “There is little buffer left against further shocks.”