A Trade War at 30,000 Feet

Will the F22 Raptor be subject to the ETS? Photo by Mark Kent. Some rights reserved.

The U.S. joined twenty-three other nations on Wednesday in signing the so-called Moscow Joint Declaration to protest the EU’s Emissions Trading Scheme (ETS), which in 2008 was extended to include aviation. It is the latest show of American opposition to the scheme, following a joint letter from the U.S., Canada, and Mexico to the International Civil Aviation Organization that we covered in 2010, and a bill passed in the House last year that prohibits airlines from participating in the ETS. Some of the other signing nations – which include China, Russia, India, Japan, and Saudi Arabia – are considering similar legislation.

The Emissions Trading Scheme, or ETS, is a declining cap on emissions for airlines, with allowances initially distributed based on the sector’s emissions in 2010. Eighty-two percent of the allowances will be given to airlines for free, 15% will be auctioned, and 3% reserved for new or fast-growing airlines. The cap will be reduced gradually to the average level from 2004-2006. Under such a scheme, airlines can choose the best way to meet their emissions obligations, either altering their operations or paying others to reduce their emissions by buying more allowances.

Wednesday’s Joint Declaration disputes the EU’s authority to regulate flights over international or other countries’ airspace. In response, the EU points to the Chicago Convention on international air regulation, which states that regulations must apply equally to all airlines regardless of their nationality. The Joint Declaration also echoes some of the U.S. House bill (which the Green Mien covered here), objecting that the EU’s action might jeopardize the prospects for coordinated international action. The EU has said it will scrap its program if a multilateral alternative comes around.

Is there a way forward? The aviation industry says it will lose $3 billion per year, so we can expect their continued opposition. Environmental advocates and sympathetic governments (including most of Europe, apparently) will point to the International Panel on Climate Change estimates that the aviation sector is responsible for 3.5% of climate change, and to the projected 183 million tons of CO2 reduced per year by 2020. While many governments opposing the ETS support an international solution administered by the International Civil Aviation Organization, the branch of the U.N. that coordinates international standards and procedures, it has been debating such a plan for more than a decade, with no emissions reduction scheme to show for it.

The possibility of a carbon trade war looms, and the Joint Resolution indicates that many countries are willing to start one. Signers of the Resolution stated their willingness to coordinate in retaliatory actions against European airlines that fly internationally, like Air France and British Airways, and Russia is threatening to resume charging airlines for flight routes over Siberia, a practice it abandoned recently. Their goal: to postpone or cancel the ETS.

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