Environment

Green travel and the carbon trade war

Non-European governments are fighting the new cap-and-trade laws. The resulting showdown is a test of the world’s resolve to combat climate change.
Turbulence Expected: A Qantas jet flies towards a thundercloud. The European Union\'s plans to make .../ Credits: Reuters
In December 2011, the European Court of Justice rejected a legal challenge from the American aviation industry and ruled that airlines based outside the EU must pay for their pollution when they fly in and out of the continent by joining the EU ETS carbon emissions trading scheme.

Airlines now need permits to cover their carbon emissions for the whole length of a flight taking off or landing in the EU. They will get up to 85 percent of those permits for free but will have to buy the rest. If they don’t comply, the EU will fine them.

Aviation accounts for about three percent of global carbon emissions, and is the fastest-growing polluter in the transport sector. Until now, it has escaped climate protection laws as it is not included in the Kyoto Protocol or other climate agreements.

Putting a carbon price on flying should encourage the aviation industry to develop more fuel-efficient and climate-friendly operations, explore alternative fuels, and develop better aircraft.

But the EU plan has triggered protests from at least two dozen countries including Japan, India, Russia and China.
The American legal challenge claimed that the EU’s plans violate national sovereignty as they cover flying time in non-EU airspace. The European Court rejected this argument but Washington has dismissed the ruling and threatened to retaliate unless the EU drops its plans.

Others such as India argue that the EU is favouring its own airlines and penalizing poor countries contrary to international climate agreements that exempt developing countries from legally-binding carbon cuts. China plans its own legal challenge, and state-owned news agency Xinhua has warned of a “trade war”.

And it’s not as if Europe’s carbon market has been an unqualified success. It already faces a crisis of confidence due to overly generous carbon allowances and a plummeting carbon price. Now, as it seeks to expand its remit, it faces a further challenge to its legitimacy.

Ultimately the argument is about money. The legislation could add 9 billion Euros to airlines’ costs by 2020, according to Thomson Reuters Point Carbon. It is up to airlines how much of those costs they pass onto their customers but the European Commission says it would add between 2 and 12 Euros per passenger.
Nervous European airlines have called for a global solution via the International Civil Aviation Organization (ICAO), the UN agency. This is also the ultimate goal of many environmental groups.

But the EU has run out of patience with the ICAO, which has produced nothing in over a decade of deliberations. It argues that it is time to stop talking and start acting as climate science demands.

Will the EU stick to its guns? Could the desire to avoid a costly confrontation trigger action on a global solution? Or could this descend into the first carbon trade war?

After promising at the Durban climate talks to fight climate change together, the world’s major powers are bitterly divided over a climate protection action that imposes costs on business, with the majority united against one of the few laws that could curb carbon emissions immediately. It’s not a promising start to the New Year.

Find more information in the ALLIANZ KNOWLEDGE DATABASE!

Delve into our world of knowledge. The Open Knowledge Database offers you insights in the knowledge, skills and experience Allianz has accumulated in over 120 years of business.


Search for related articles