Friday, 27 June 2008

Europe goes after the skies

Amid all of the hand-wringing and fear that the Ireland ‘no’ vote will bring the EU to a chaotic standstill in January, judging by the news yesterday Brussels isn’t ratcheting down its ambition in the mean time.

After much negotiation, the EU at long last reached an agreement Thursday to add airlines to the ‘carbon credits’ scheme that requires big polluters to purchase credits in order to pollute. It is a truly landmark agreement because it will force not just European airlines, but foreign ones as well, to participate in the carbon scheme in order to use European airports. That part of the agreement is surely going to result in a fiery showdown with the United States, which today called the scheme both “illegal” and “unworkable.”

The Emissions Trading Scheme was started in 2005, and so far has only included heavy industry. It requires them to buy credits for each set amount of carbon dioxide they release into the atmosphere beyond a specific allotted amount. The European Commission and EU regulators have been eyeing adding airlines to the scheme for some time, as heavy industry argued it was being unfairly targeted. It’s the first such requirement in the history of aviation, requiring all airlines arriving or leaving from airports in the European Union to buy pollution credits beginning in 2012. The proposal still needs the approval of the European Parliament and the EU member states, but Slovenia, which currently holds the EU presidency, has apparently already gotten member states on board.

The airlines and the US government are furious over the new rules, with both saying that the scheme will invariably lead to a dramatic increase in airfare for consumers, at a time when increasing fuel costs are already driving ticket prices sky high. The International Air Transport Association, the industry’s biggest lobbying group in the US and the EU, is saying that the costs to the airline industry of buying permits would be more than $4 billion, at a time when the industry is already expected to lose $6.1 billion this year.

The material effect won’t be visible for some time however, as the initial permits would be allocated to airlines by the European authorities, with airlines having to buy just 15 percent in auctions. The hope is that by the time that the airlines had to fully buy the permits, other blocks such as the United States will have instituted similar schemes, or a global policy could be reached. But the EC said Thursday that at this point in time it couldn’t wait for a global decision but had to push ahead with its own policy that would force regulation on everyone. Considering that the major cities of Europe are a popular air hub for people travelling from the US East Coast and Asia, it wouldn’t be just people travelling to and from Europe that would be affected.

It strikes me that another major concern with all of this is the effect it would have on European tourism, already suffering because of the high value of the euro. At the moment I can’t convince any of my US friends to come visit me here in the UK or to meet me on the continent because the exchange rate for them is so bad. If travelers from North America or Asia had to deal with both an unfavorable exchange rate and a flight surcharge, they might look elsewhere for their holidays. Americans are already a bit reticent to visit Europe, and the idea that flying to Paris could become twice as expensive as flying to Argentina or Japan would very likely influence their travel decisions.

On the other hand, for those that think reducing flights is essential for combating global warming, this is a perfect example of why the EU is needed if Europe wants to seriously tackly the crisis. This is exactly the sort of measure that would be pointless and ineffective if established by any individual European government. It also demonstrates the power a united EU has on the world stage. As the largest consumer market in the world, the decisions made in Brussels can force the hand of global superpowers such as the US and China when it comes to tackling the problem of climate change, in a way European states never could on their own. Without the EU, Europe would be a follower and not a leader on the issue of combating climate change.


Anonymous said...

This is real BS. While all the European carriers will be burdened with this extra cost, they won't be able to compete with the non-European carriers. It is ridiculous to punish airlines for global warming, they account for something like 2 percent of carbon emissions!!

tanyaa said...

Later this month, phase one of the long heralded Open Skies agreement will come into effect. Theoretically, the agreement deregulates the airline industries of the US and Europe. Plans are aimed at lowering flight costs, opening up airlines to foreign ownership, and the creation of new routes between Europe and the US.