Friday, September 30, 2011
The two-day meeting in New Delhi wrapped up today with 26 ICAO members, including China and the U.S., agreeing on a joint declaration of opposition to the EU emissions plan. See Krittivas Mukherjee and Michael Szabo, India, 25 Others Oppose EU Airline Carbon Charge Plan, Reuters, Sept. 30, 2011 (available here). According to the Reuters story, the EU remains unswayed by the complaints from non-EU states. The next major development on the ETS should come as soon as next week when the ECJ is expected to issue its initial opinion on a legal challenge to the plan brought by U.S. carriers.
Thursday, September 29, 2011
More than 30 ICAO members met in New Delhi today to develop a strategy for how best to resist implementation of the EU emissions plan. See Karthikeyan Sundaram, India Rallies 30 Nations Against EU Airline Emission Levy, Bloomberg, Sept. 29, 2011 (available here). Meanwhile, in Rome, Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organization, indicated that his organization, which represents Emirates, Etihad and Qatar Airways, among others, also opposes the ETS. See Nicola Clark, Middle Eastern Airlines Join Opposition to E.U. Emissions Plan, N. Y. Times, Sept. 29, 2011 (available here). The New Delhi talks are scheduled to conclude tomorrow.
Wednesday, September 28, 2011
Should the EU ETS take effect in January as planned, the economic effects will reverberate through the industry. By one estimate the total industry-wide cost of compliance in 2012 will be 1.1 billion euros. See Michael Szabo, Easyjet Warns ETS to Erode 2012 Profits, India Rebels, Reuters, Sept. 22, 2011 (available here). Given the already tight profit margin on which most airlines are currently operating, the industry will likely seek some form of political relief. As of now, for non-EU carriers that has manifested itself in opposition to the EU ETS. However, should there come a point in the near future where carriers are forced to accept that some level of emissions reduction costs are inescapable, the question will then become what alternative form of political relief might carriers seek? In short, could ETS be the trigger that provokes a broader and more concerted push for substantial liberalization such as repeal of the nationality and cabotage rules? It is conceivable that once carriers are confronted with permanent costly emissions regulations, they will no longer be willing to tolerate costly protectionist restrictions. The further-reduced profit margins resulting from ETS compliance could leave states with no choice but to allow cross-border mergers and consolidations for carriers to remain economically viable. Conversely, it is also possible to imagine the economic consequences of emissions regulation prompting industry actors to seek out increased rather than reduced state protectionism. As we have seen recently in response to Emirates' success, some states have reflexively adopted a more protectionist posture aimed at reducing access and competition for vulnerable flag carriers. It would be highly unfortunate if a more desperate economic climate brought about by emissions regulation contributed to a global step backward from the progress that has been made toward trade liberalization over the past two decades. This is all speculative for now, but it is worth contemplating the hard-to-predict ramifications of ETS compliance costs on the industry's future.
Tuesday, September 27, 2011
Sandwiched between yesterday's announcement of benchmark values for ETS emissions allowances and tomorrow's meeting in New Delhi for ETS objectors, proponents and opponents of the scheme restated their positions today. IATA Director General Tony Tyler, speaking at the Greener Skies conference in Hong Kong, advocated what has also been U.S. thinking on the matter in saying that airlines would support reducing emissions through continued investment in fuel efficient aircraft, biofuels and improved air traffic management systems, and that airlines might be amenable to a global trading scheme, but were opposed to the EU's regional plan. See Christopher Hinton, Airlines Back 'Cap and Trade' Just Not the EU's, MarketWatch, Sept. 27, 2011 (available here). Meanwhile, Jos Delbeke, Director General of the EC's Climate Action directorate, told reporters in Brussels that the EU preferred a global solution to its current plan, but lack of progress on a global emissions scheme (notable at ICAO) had motivated the EU to take unilateral action. See Pallavi Aiyar, Fasten Your Seatbelts, Says Brussels, Business Standard, Sept. 27, 2011 (available here). As Brian F. Havel and Gabriel S. Sanchez acknowledge in their forthcoming article Toward a Global Aviation Emissions Agreement (available here), a unified global emissions agreement is infeasible in the near future, so the EU is not off base in its concern that waiting for a uniform global agreement is at best naive and at worst a stalling tactic. Though, as Havel and Sanchez also argue, the EU's unilateral application of its emissions rules to non-EU airlines operating outside of EU airspace may be no more viable a solution as it is at odds with the Chicago Convention and may not survive the legal challenge by American carriers in the European Court of Justice. Expect more statements opposing the ETS over the next two days from the participants in the New Delhi meetings. Neither side is likely to soften its stance before the ECJ ruling, expected next month.
Monday, September 26, 2011
To begin what should be an eventful week in ETS news, the European Commission today made public the benchmark values by which free greenhouse gas emissions allowances will be allocated. See EC press release available here. The benchmarks should give airlines a clearer idea of the costs of the EU's plan to limit greenhouse gas emissions, scheduled to enter into effect in 2012. Rhetoric over the ETS is likely to heat up as non-EU states are scheduled to meet later this week in New Delhi to draft a declaration opposing the plan. See Tarun Shukla, India to Lead Campaign Against EU's Carbon Levy, Livemint.com, Sept. 22, 2011 (available here).