BackA looming trade war, high in the sky
A looming trade war, high in the sky
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From 1 January 2012, airlines will have to account for their emissions of carbon dioxide whenever they fly their aircraft to the European Union (EU), irrespective of the flag they bear. This development is the result of the inclusion of the airline industry in the Emissions Trading Scheme (ETS), the regulation that has been adopted by the 27-member grouping to reduce carbon dioxide emissions. ETS was introduced in 2005 with a view to meeting the commitments that the EU had taken under the Kyoto Protocol of the UN Framework Convention on Climate Change (UNFCCC). Initially, the EU ETS covered energy activities and a few industries such as ferrous metals and the minerals. In 2008, the EU member states decided to include the airline industry within the ambit of the EU ETS. But while only entities belonging to the EU member states were included in the EU ETS thus far, the inclusion of the airline industry marks a departure from this model in that airlines from the EU’s partner countries will also face the new regulations. Indications are that the EU may not limit its action to the airline sector; the maritime industry could follow soon.
The global airline industry has strongly responded to the EU proposal. Industries belonging to China, India, Russia, Canada and the US have all raised a red flag against the proposed regulation. The China Air Transport Association has commented that the EU ETS violates international law and that interferes with other countries’ sovereignty.
ATA challenged the legal validity of the EU ETS, arguing that it was a unilateral measure. Countries outside the EU had not agreed to the regulations on the airline industry and yet the European Commission was imposing its own laws and regulations on third country carriers in third country airspace. ATA also argued that the proposed EU ETS provisions were unfair for they would regulate an entire flight from across the US to the EU, even though the aircraft would be in the EU airspace for only a fraction of its journey.
More recently, the industry received support from both law makers and the administration. In July, a bipartisan group of transportation committee leaders of the US Congress introduced a Bill to ban US airlines from participating in the EU ETS. The Bill, the “European Union Emissions Trading Scheme Prohibition Act of 2011," directed the secretary of transportation to prohibit US airlines from participating in the EU ETS. It also instructed the US officials to negotiate or take measures necessary to ensure that the US operators were not penalized by any action that the EU may unilaterally impose. At the same time, the US transport department has also been voicing strong objection, on both legal and policy grounds, to the proposed unilateral imposition of ETS on foreign operators.
Although several environmental groups have supported the EU move since, in their view, the proposed regulation will force airlines to look at factors that make jet emissions in the stratosphere two to four times more damaging than the levels of carbon dioxide they emit, the use of unilateral measures by the EU could have far- reaching implications on two fronts. First, unilateral actions against enterprises operating or based in other jurisdictions could encourage other countries to follow suit. And, two, use of unilateral measures for reducing the emission of greenhouse gases could severely undermine the already beleaguered climate change negotiations.
In recent months, India, along with other developing countries, has alluded to the fact that unilateral trade measures (UTMs) have adversely affected the interests of developing countries. They have argued that such trade restrictions can adversely impact their economies and social development and poverty eradication programmes in developing countries. It is significant to note that any attempt to address concerns related to climate change through the use UTMs can trigger trade retaliatory actions by the affected parties leading to trade wars, which an already crises-ridden global economy can ill-afford.
It is the multilateral regime on climate change that will be severely impacted by the proposal to extend the EU ETS to the airline industry. The regime is under considerable pressure to conclude a post-Kyoto agreement well before the first commitment period of the protocol expires at the end of 2012. The air of optimism around the forthcoming Durban conference of parties of UNFCCC has dwindled considerably ever since Canada, Russia and Japan expressed reluctance to agree to extend the Kyoto Protocol into its second commitment period. Under such circumstances, the controversies centring on the EU proposal to extend ETS to the airline sector could cast its long shadow on the outcome of the Durban conference.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.
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