Isra-Mart srl: US and Europe Battle Over Carbon Fees for Airlines

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Sharply divergent climate change policies on opposite sides of the Atlantic are setting off political fireworks as European environmental regulators prepare to extend their reach across the ocean. Starting Jan. 1, the European Union will require all carriers entering or leaving its airports to either reduce their emissions or pay a charge — whether the airline is United, Air France or Lufthansa.

Airplane on runway
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Until now, the United States and Europe have taken a to-each-his-own attitude on how to handle the greenhouse gas emissions that contribute to global warming, leaving American consumers largely immune to aggressive European environmental regulation and its costs. But come 2012, Americans flying to Europe are likely to be paying indirectly for the emissions their trips create — chiefly through steeper fares, although uncertainty persists about how much higher they will be.

American carriers and air freight companies will also face a new type of competition, because the “cleanest” airlines will pay less in emissions fees.

The United States airline industry has fought aggressively against inclusion in the European Union Emissions Trading System, most recently in a lawsuit filed before the European Court of Justice, the European Union’s highest court. It argues that the European Union has no legal right to regulate American carriers or flight emissions that are released over other countries or into international airspace as planes make their way across the ocean. A ruling is not expected until late this year at the earliest.

The issue has also created diplomatic tensions. “The European Union is imposing this on U.S. carriers without our agreement,” Wendell Albright, director of the Office of Aviation Negotiations at the State Department, said in an interview on Wednesday. “It is for the U.S. to decide on targets or appropriate action for U.S. airlines with respect to greenhouse gas emissions.”

He said the Obama administration had voiced its displeasure to the European Union and was “exploring various options” to address the standoff.

The European emissions trading system relies on a cap-and-trade mechanism in which companies that exceed their government-mandated targets for reducing their carbon dioxide emissions must buy carbon permits from businesses that earned them by emitting less than they were allowed. New industries enter the program each year.

American carriers project that they will end up spending $3.1 billion on the carbon permits by 2020. That could ultimately raise the price of a trans-Atlantic ticket as much as $57 for a flight from New York to London, according to some industry estimates.

The European Union is “attempting to regulate the airlines of the world,” said Nancy Young, vice president for environmental affairs at the Air Transport Association, the largest airline industry group in the United States. “The plan violates international law.”

European Union officials are standing firm, saying that adding civil aviation and cargo flights to Europe’s expanding emissions trading system is both legal and nonnegotiable.

“In Europe, we’re trying to do something with climate change and we now have emissions targets for sector after sector,” said Connie Hedegaard, the European Union’s commissioner for climate action. “We now include power producers, we now include manufacturing, so how can we not include aviation?”
Under the current plan, all airlines flying into airports within the European Union will have to reduce their emissions next year by 3 percent from average levels between 2004 and 2006, or buy carbon permits to make up the difference.

Ms. Hedegaard added that was unfair to require European airlines to pay for their pollution on routes that United Airlines or Air China flew for free.

At a hearing before the European Court of Justice last month, lawyers from the European Union and environmental groups said inclusion was legal, comparing the emissions fees to a landing charge or to a prohibition on overly noisy aircraft.

Annie Petsonk, a lawyer who attended for the Environmental Defense Fund and who previously worked for the Justice Department, said: “The E.U. system is not a tax — if you don’t want to pay you can reduce your emissions. ”

At the heart of the dispute are the disparate political positions taken by Europe and the United States on appropriate measures for reining in greenhouse gas emissions and the gravity of climate change. Carbon dioxide emissions from air travel are one of the fastest-growing sources of the gases that scientists say are warming the planet, and they have an outsize effect because they are released high in the atmosphere, scientists say.
While a substantial contingent in Congress continues to express skepticism that human-caused climate change is a serious problem, European countries have been obliged to reduce emissions since 2005 under the Kyoto Protocol, which was never ratified by the United States.

Countries like Britain have written stringent emissions reductions targets into law. With those in mind, Britain refused last year to permit construction of a new runway at Heathrow Airport because it would enable more air travel. British companies, including the telecommunications company Vodafone and Aveva, a software giant, have taken steps to cut business flying.

International climate treaties assign the International Civil Aviation Organization, a body that governs protocols and procedures for global aviation, to oversee the reduction of airline emissions through its member states. The Obama administration, while emphasizing that it supports programs to reduce the growth in airline emissions, has cited such treaties in arguing that the European Union has overstepped its jurisdiction.

But critics counter that the aviation organization, which consists of representatives from 190 nations, has been ineffective on that front, relying on purely voluntary measures. “We would have liked to see a global agreement, but for how long can this sector avoid being part of the solution to the climate problem?” Ms. Hedegaard said.

Perry Flint, a Washington spokesman for the International Air Transport Association, said that the American airline fleet was generally older and therefore less fuel-efficient than its Western European counterpart. But many American carriers are already taking steps to reduce emissions, like buying more fuel-efficient jets and flying more direct routes. Those efforts have been driven primarily by high fuel costs and a desire to project an environmentally friendly corporate image, not by the anticipated European mandates.

This month, American Airlines, which has flown an all-Boeing fleet since 2009, announced that it had bought more than 250 new planes from the European manufacturer Airbus, citing efficiency as a big factor.

With their European Court case unlikely to be decided soon, American carriers have started monitoring and reporting emissions from their flights to the European Union as required in preparation for entering the system — albeit “under protest.”

Other foreign airlines like the national carrier Air China have been negotiating separately with the European Union. The Europeans have said that airlines could be exempted from the system if they proposed equivalent emissions-reducing measures at home; these might include using cleaner fuels.

Part of the uncertainty over the extent of a ticket price increase — the European Union suggests it might just be a few dollars — is rooted in how carbon permit prices vary over time, depending on demand. Currently the price is low because of the global recession.

In 2012, the European Union plans to hand out a substantial number of free credits to ease the transition. But airlines that significantly improve their environmental performance might not need to buy the credits at all. They could even earn extra credits to sell, which could in theory reduce the price of a ticket.