Indian carriers’ entry into the European Union (EU) carbon market next year is set to slow expansion plans as operational costs rise, leading to higher airfares that will make some airlines less competitive than their rivals.
From January 2012, emissions from all flights that arrive at or depart from an EU airport will be covered by the EU emission trading system (ETS).
The scheme, aimed at reducing industrial greenhouse gas emissions cost-effectively, will cover all airlines operating in the EU except for very light aircraft and flights involving the military, police, customs, rescue operations and government business.
While the US and China have already protested against the scheme, the Indian government is yet to take a stance on it.
Air India Ltd, Jet Airways (India) Ltd and Kingfisher Airlines Ltd have flights operating in Europe and plan to increase flights to the continent.
Aviation accounts for less than 3% of 2009 global carbon emissions, but is expected to increase to 5% by 2050.
Under the proposed scheme, the EU can impound and sell any aircraft in the event of non-compliance and cancel an airline’s certificate to fly, technically known as air operator’s certificate.
The EU ETS will add to costs in terms of monitoring, reporting and verifying carbon emission records. Airlines will also have to spend to allocate and trade carbon credits in the open market.
A senior Air India executive said the airline has already started submitting verified data on carbon dioxide emissions to EU ETS. “We were asked to submit this data under protest. This is a one-sided regulation. We have asked the ministry to frame similar regulations for carriers that are flying to India,” the executive said.
The EU ETS system is discriminatory towards Indian carriers, said a senior private airline executive, requesting anonymity.
“I was associated with EU ETS and I know how it functions. There is no need for such regulations as India is not a mature market and operates largely newer fleet,” he said.
Another executive from another private airline that is operating in Europe said the aviation ministry is yet to take a firm stance on EU ETS.
The ministry of civil aviation did not offer any comments for this story.
A senior airline consultant said the current scheme is against the interests of smaller, newer and more efficient carriers in emerging and developing economies. According to him, the past record of emissions for mature European airlines is high compared with new ones.
High historic emitters will be rewarded with high emission credits, whereas the low recent emitters will be penalized with low emission credits, he said.
Historic aviation emissions are the basis for calculating the cap on aviation emissions applied when the sector is included in the EU ETS from January 2012. The European Commission has calculated this on the basis of annual emissions in 2004, 2005 and 2006 of all flights that are operating to and from European airports, according to an EU website on ETS.
“Europe is unilaterally moving forward with plans to include aviation in its emissions trading scheme... A flight from India to Europe could fly over a dozen countries. What gives Europe the right to (levy) taxes? It is in contravention to the Chicago convention. We urge India to join the countries, including China, to oppose Europe’s plans,” said Albert Tjoeng, assistant director (corporate communications) for Asia-Pacific at the International Air Transport Association, which represents some 230 airlines comprising 93% of scheduled international air traffic.
Many leading carriers in China have taken up the issue with the EU.
The China Air Transport Association, representing seven carriers, last week sent a formal notice to the EU registering its protest against inclusion in ETS, saying Chinese carriers will be forced to pay millions of euros to comply with ETS.
They said they will end up paying more as these carriers increase flights between China and Europe.
The US carriers are also ready to fight the scheme.
Lobby group Air Transport Association of America (ATA) vice-president (environmental affairs) Nancy Young, in an email to Mint, said ATA and its members—along with many countries and airlines around the world—believe that the unilateral application of the EU ETS to non-EU airlines violates international law and is bad public policy.
“We believe airline greenhouse gas emissions should be addressed under a global approach, rather than through a unilateral action by the EU,” she said. “The unilateral application of the EU ETS to our airlines is not in line with the treaty governing international aviation under which ICAO (International Civil Aviation Organization) and its member states operate or with ICAO guidance.”
“These are only a few of the many bases for a legal challenge we have brought against the EU ETS as applied to our airlines. That case is pending in the UK high court, which has referred to the European Court of Justice asking key questions regarding the validity of the EU ETS as applied to aviation,” she said.
The consultant cited in the story pointed out that EU ETS might lead to higher costs and potential liabilities for aircraft finance and insurance firms.