The European Parliament and Council of the European Union are debating the inclusion of aviation in Europe’s Emissions Trading Scheme (a so-called “cap and trade” system for CO2 emissions) under the European Community’s “co-decision process.” Key votes are due this month from the transport and environment committees of the Parliament, before a plenary session next month potentially sets its final form in concrete if the two Community institutions reach an agreement.

While the ETS came into force on Oct. 25, 2003, under Community Directive 2003/87/EC and started to affect industries such as power generation on Jan. 1, 2005, the legislative instrument to add aviation came in the form of a draft directive published by the European Commission last December. It proposes to include aviation beginning Jan. 1, 2011, for intra-EU flights and a year later for flights beginning or ending in the EU.

A Commission policy officer told AIN that “all sectors need to contribute as [emissions are] a big problem,” and that “aviation makes a modest contribution now but there is significant growth projected and no technology fixes on the horizon.

“The directive is going through the co-decision process with 467 amendments tabled by the parliamentarians to be voted on in mid-September and in October–then November’s plenary session will see the parliament take an official position,” said the representative. “If it is not all agreed by the council then there will be a second reading.”

The proposal faces considerable opposition, however. According to the Air Transport Action Group, “ETS should be properly designed through ICAO. This is the best way to avoid political and legal disputes from arising when certain states impose an ETS on foreign airlines without the prior consent of their state of registry.” The EU, however, says that it cannot wait for a global solution and has started to press ahead regardless.

Giovanni Bisignani, secretary general of IATA, has warned that bringing aviation within the ETS still means that the EU must follow ICAO guidelines (due next year). “The only way forward is a harmonized approach,” he said.

The U.S. remains more vociferous in its opposition. During a visit to Europe in June, Andrew Steinberg, DOT assistant secretary for aviation, said that the ETS “would violate international law and undercut international efforts to better manage the impact of aviation emissions.”

In June Europe’s aviation industry published a feasibility study, produced by York Aviation with Ernst & Young, which concluded that including aviation in the EU ETS would prove “costly and unworkable” and that higher ticket prices could recoup only a third of the cost to airlines. The annual cost to European aviation, said the report, could run as high as E4 billion.

The industry associations that commissioned the report–the Association of European Airlines, the European Regions Airline Association, the International Air Carrier Association, European Cargo Alliance, the European Low Fares Airline Association and the European Business Aviation Association–said it “concludes that the European Commission’s proposal in its present form will jeopardize the long-term viability of the European aviation industry,” given that the E4 billion accounts for more than twice the entire average profit of Europe’s airlines over the past decade. They also pointed to the competitive disadvantage it would effect should U.S. carriers, and perhaps others, manage to avoid the scheme through successful legal challenges.

The ERA has shown broad support of an open emissions trading scheme, but it clearly does not support the current proposed formula. Simon McNamara, ERA general manager for infrastructure and environment, called ETS “the right tool badly executed.”

The ERA believes that the Commission did not pay enough attention to the administrative burden in its impact assessment, although the EC dismisses that complaint and believes that operators have to collect only information to which they already have access and that third-party organizations should emerge to help smaller operators.

Another problem for the ERA centers on the formula for allocating permits, namely the Commission’s proposal to base credits on revenue ton-kilometers, which means operators who carry more passengers get higher allowances. This, said McNamara, discriminates against regional operators, who might not have high passenger load factors but serve vital intra-EU routes, with distinct economic and social benefits.
Low-fare operators, on the contrary, would gain an advantage–despite their high concentration of leisure travelers. ERA therefore favors a system based on available ton-kilometers, “which also better reflects the environmental burden,” claimed McNamara.

Jasper Faber, aviation specialist for CE Delft, the Dutch environmental consultancy that recently performed for the EC a feasibility study titled “Giving Wings to Emissions Trading,” said that opinion on the issue varies widely. For business aircraft and some regional operators, he said, the weight threshold is “a particularly sensitive issue.”

EBAA president Brian Humphries, for example, says that the mtow threshold for aircraft caught by the ETS should increase from 5,700 kilograms to 20 metric tons. Humphries also asserts that the proposed benchmark to award carbon credits based on ton-kilometers would prove “highly discriminatory” and proposes the use of a benchmark based on fuel burn and fleet age.

Nevertheless, said Faber, “I can’t see [the ETS] going [away] …but I can see it being postponed by a couple of years, with some details changing–for example, to be based on all departing flights, rather than all departing and all arriving flights.

“The ICAO assembly might spoil things if EC member states don’t maintain a united front. Some member states could change sides,” he warned. “The official standpoint of ICAO and CAEP is for a global solution for ETS, while America and Australia are saying, ‘You can do it for EU flights but don’t include our airlines in it.’”

Meanwhile, many other organizations have added their voices to the debate. Citing a report from the Tyndall Centre for Climate Change Research at Manchester University, Friends of the Earth has called for strengthening the current proposals to include aviation in the ETS. According to center director Dr. Keith Anderson, “The current aviation ETS proposal must be significantly strengthened both to drive down emission growth rates and to force the adoption of more efficient aircraft technologies and operation.”

The report asserts that proposed CO2 permit prices must rise several-fold to offer any real incentive and that aviation should enter the scheme “by 2010 at the latest because by 2012 EU aviation emissions could be 25 percent to 60 percent greater than 2005 levels.”

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