The US, Canada and Mexico have sent an official letter to a UN body asking for a resolution to stop the EU Emissions Trading System (EU ETS) for Aviation, which is scheduled to start in January 2012. 

Emissions Market

Under EU ETS, airlines would have to buy allowances (EUA) to offset their CO2 emissions. When it starts in 2012, 85% of the EUA will be free, but airlines would need to purchase the balance 15% on the market. This percentage would increase gradually and by 2020, airlines would need to purchase the full 100% of their allowance.

According to IATA estimates, airlines would need to buy allowances for around 104 million tonnes of CO2 in 2012, rising to 209 million tonnes by 2020.

Based on a €33 trading price, the IATA estimates that the airline industry would end up paying €3.5 billion in 2012, rising to €6.9 billion by 2020. This would add 12 € cents per gallon of jet fuel, rising to 17 € cents by 2020.

Bottomline is that the global airline industry and governments outside the EU are all united in their opposition to the unilateral nature of the EU ETS. The US Air Transport Association, American Airlines, Continental Airlines and United Airlines have already filed a legal challenge against it in the UK High Court of Justice.

Now they’re supported by the federal governments of the United States, Canada and Mexico, who have sent a joint letter to the UN International Civil Aviation Organization.

The letter says that there is no global agreement on one country imposing an emissions trading system on another one’s airlines, and asks for a resolution disallowing this unless there is an agreement between the two countries. The resolution would be non-binding, but the political reality is that the EU cannot ignore it.

If the resolution is passed, the end result would mean that the EU ETS for aviation would be postponed indefinitely, pending a global emissions scheme for airlines. The EU won’t even be able to force its own airline companies into ETS, because it would give the non-participating airlines outside the EU an unfair advantage. 

But a global cap & trade system for aviation doesn’t look likely to happen anytime in the near future. The end result is a win-win situation for the airline industry.

Related Resources:-
ec.europa.eu/environment/climat/aviation/index_en.htm 
www.iata.org/whatwedo/environment/Pages/emissions-europe.aspx

Photo – Karen Eliot