When you drive on France’s motorways, you pay for the privilege. In return you get first class asphalt, nice rest areas and a means to cover the vast distances of that country safely and efficiently. When Austria introduced their road toll system, the money went to refurbishing their aging motorways and to building new ones. The result was an astonishing improvement to a road system already of a very high quality. But not all toll systems are this nice…
When the European Union’s Emission Trading Scheme (ETS) is unilaterally extended to aviation on 1 January 2012, it will cost the industry a cool 3.4 billion euro a year and possibly more if we include the negative impact in terms of global competitiveness. There is a global outcry and it looks like politicians in Europe have found a way to upset the rest of the world for no possible good to Europe or anyone else.
Had it been so that the money gathered from aviation under the ETS would be reinvested in aviation related environmental projects, the case would have been very different. Nobody would be cheering and some aspects of this fatally flawed rule would still need to be repaired but at least it would have a semblance of common sense and would do some good for the environment.
As it is now proposed, the aviation part of the ETS is nothing but a new tax that will do nothing to protect the environment. Politicians in Europe usually find it very hard to agree on anything but they love taxes. They love ETS. Originally it was proposed that income from ETS should be reserved for environmental projects alone. The idea was never accepted… of course.
So, what is the big row about?
The ETS to be introduced on 1 January 2012 would allocate for free 82 % of the airline greenhouse gas emission allowance to the carriers, taking 2005 as the baseline. They would then be required to buy traded certificates at market prices for 15 %. 3 % is reserved for new and fast growing airlines… This tax will apply to all airlines operating in and out of Europe, irrespective of where they are based.
Especially the US and China are up in arms saying that the tax is being levied in an unlawful manner with the EU legislating outside its territory. But aviation trade groups in South America and other parts of the world are also fiercely opposed to this unilateral action by the European Union. Powerful non-EU States are threatening retaliatory action if the ETS is pushed through.
IATA’s outgoing CEO was especially vocal at the recent AGM about his association’s views on the EU ETS: “The European Union is ignoring international law in ETS. Uncoordinated, punitive measures distort markets and do nothing to reduce emissions.”
It is not that international civil aviation wants to wiggle out from under its share to reduce emissions. In fact, the measures already taken and those planned have been hailed at environmental meetings as examples for other industries to follow. IATA has set goals that call for carbon-neutral growth by 2020 and cutting emissions in half by 2050.
It is telling to recall that when the ETS was cooked up by European politicians, agreement was quickly reached on this new source of tax revenue but when it came to agreeing the use the additional money was to be put to, no agreement was possible. Of course… As it is, the money from ETS will sink into State coffers and it is anybody’s guess how much the environment will benefit from it. A very different scene from that in road transport where at least in some countries the knowledge that the money you pay will go into infrastructure improvements easers the pain somewhat.
As I said before, even if ETS money were earmarked for aviation related improvement projects only, the system as currently proposed would need to be repaired in a big way.
Aviation is a world-wide enterprise and regional solutions and taxes are anathema to it. ICAO has recently agreed certain principles to be used when ETS-like systems are put in place but so far only the EU has proposed an ETS and its approach is, to say the least, peculiar. The result is a first class mess and international uproar.
Why the EU thinks it is a good idea to penalize its own airlines is a mystery. The ETS covers the complete operation of European airlines while those based outside the EU will only have to pay for their European legs.
Then there is “carbon leakage”. Fly Hong-Kong-Paris and the whole trip comes under the ETS. Fly Hong-Kong-Dubai-Paris and only the Dubai-Paris leg counts. It simply does not make sense.
Another curious element is the dispensation given to non-EU carriers who operate only a very low number of flights into Europe. These are effectively released from falling under the new rule. But a European carrier with the same low number of flights on the same route would not be exempted.
This is what you get when bureaucrats sit down and devise new rules with little or no understanding of the area they are trying to regulate. Global aviation is far too complex to meddle in on a regional basis while ignoring the bigger picture.
It is particularly worrying that comments on the developing situation tend to project the airlines as the bad guys who do not want to pay. Nothing could be further from the truth.
A convincing, global and equitable system that does in fact promote environment friendly aviation developments is in everybody’s interest and all airline associations have stated clearly their support for such a scheme. Unfortunately, the ETS as currently proposed is anything but fitting that picture.
Next time you travel in France and pay the toll, give a thought to what it would be like to drive among potholes and dirty parking lots instead of what you have now. That would be like the European Union’s beloved ETS as it is planned for next year.
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