Energy Policy

IATA adopts resolution on market-based mechanism to address airlines’ emissions

On June 3, at its annual general meeting in Cape Town, South Africa, the International Air Transportation Association (IATA) agreed on a proposal that shall encourage governments to adopt a single market-based mechanism (MBM) to regulate the aviation industries’ carbon emissions.

After heavily protesting against the European Union’s emissions-trading system (ETS) last year, countries across the world are trying to reach a global pact to regulate carbon emissions. The IATA resolution places now pressure on the UN’s International Civil Aviation Organization (ICAO), to secure a global deal to reduce air industry pollution at its upcoming meeting in September. The EU has made clear that if consensus will not be reached, the EU Emissions Trading Scheme will be put in force again.

The IATA resolution can be found here.

Dispute over participation of airlines in European emission trading scheme

The opposition of the US Congress and Administration to the European Emissions Trading Scheme (ETS) is now supported by law. President Barack Obama signed the European Union Emissions Trading Scheme Prohibition Act of 2011 on November 27, 2012.

The resistance to the EU initiative took several steps: The House of Representatives passed a bill last year that authorizes the Secretary of Transportation to prohibit operators of civil aircraft companies to participate in the European Emissions Trading Scheme. The Senate passed a similar bill on the 25th of September 2012. The Senate draft included regulations that allow the Secretary to reconsider said prohibition if the EU imposed changes to the EU emissions trading scheme or if the prohibition is not compliant with “public interest”. Furthermore, the Secretary, as well as the Administrator of the Federal Aviation Administration, and other relevant government officials are authorized to conduct international negotiations, including efforts “to pursue a worldwide approach to address aircraft emissions, including the environmental impact of aircraft emissions.” The Senate bill passed the House of Representatives on November 13th 2012. President Obama signed it into law on November 27, 2012. 

The bills were in response to the EU Directive 2008/101/EC, an amendment to EU Directive 2003/87/EC, also referred to as European Emissions Trading Scheme. The directives obligate airlines that depart from or land on European territory to cover their carbon-dioxide emissions (CO2) by allowances. In cases of insufficient coverage of emissions by allowances, airlines must pay penalties to the EU.  Senator John Thune (R- S.D.), sponsor of the Senate bill, called it a “strong message to the EU that they cannot unilaterally impose an illegitimate tax on the United States”. Another reproach made by opponents of the ETS held that by imposing the EU Directive, the EU is preempting the International Civil Aviation Organization (ICAO), the responsible body for the development of international aviation standards.

In December 2011 a case brought by Airlines for America (the only trade organization of the principal US Airlines) and three US-based airlines against the EU Directive (Case C-366/10) was dismissed by the Court of Justice of the European Union. In addition to the US, several other countries oppose the Directive, for example China, India, Russia and Canada.

As the dispute continues, EU Climate Commissioner Connie Hedegaard proposed in November 2012 to suspend the tax for flights to and from third countries until November 2013. In case there is no agreement at ICAO level by then, the emissions trade will be automatically reintroduced. Approval by the EU member states and the European Parliament of this proposal is still pending.

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Barry Post
Analyst, Energy Policy

Email: bpost(at)rgit-usa.com