AIN Blog: Emissions Trading Scheme Generates Confusion and Confrontation

 - February 28, 2012, 2:43 PM

Sometimes the simplest solution is the best, but good luck getting politicians on board when the subject involves the emissions trading scheme (ETS), which was implemented by the European Union on January 1. The EU-ETS is a confounding piece of logically challenged political mumbo jumbo disguised as a lofty goal, the reduction of carbon emissions by aircraft flying to and from Europe. (The EU’s efforts to reduce aviation carbon emissions, it should be noted, are necessary because of agreements made in the signing of the Kyoto Protocol. And, countries that don’t like the ETS are free to counter with their own carbon-reduction programs, although this hasn’t happened yet, and some countries have prohibited their air carriers from complying with the ETS.)

While many provisions of the EU-ETS are needlessly complicated, what mostly upsets airlines and business jet operators is that the EU is assessing a carbon tax on the entire flight—for aircraft arriving in and departing from the participating countries—not just the portion over European airspace. The implementation is much more complex, however, and this is where most of the problems lie.

For example, participating airlines and business jet operators, if they aren’t exempt, have to account for their carbon emissions by using a complex formula that must be audited by an approved agency. That’s like lawyers being paid to advise all parties in a conflict; only the lawyers come out ahead financially.

No one knows why the EU ministers chose such a complicated method to account for carbon emissions generated by the jets that fly into and out of European airports. There is a far simpler method that could be used, and that is to calculate the average carbon emissions based on fuel consumption, and leave it at that.

Actually, there is a much easier way to motivate anyone—airline or individual—to cut carbon emissions: raise the fuel tax. This would have a far stronger impact on encouraging reductions in emissions than the EU-ETS, and it would result in far less hair-pulling and angst, although it would put a few auditors out of work.

But that’s too simple and, sadly, politically impossible anyway. People seem to prefer complex solutions to simple problems, maybe because it looks like more is being done to fix the problem.

In fact, aviation has been on the right track for many years, with turbine engine efficiency improving by an average of one percent per year for decades and projected to continue for a few more years. Why are we wasting so much effort on the bizarre and maddening ETS?

And, will the ETS have the desired result of lowering carbon emissions? That is doubtful, given the projected growth of the world’s airlines. Already, corporate pilots are calculating how to avoid the ETS altogether, by avoiding landing at ETS participants’ airports and overflying European airspace. This avoids the need to participate in the ETS, yet may not have a beneficial effect on carbon output, especially if the avoidance maneuvers add extra distance to what might otherwise have been a relatively efficient trip.

Comments

Neil's picture

I agree with you that the ETS is overly complicated, and creates a disproportionate administrative burden for business operators. I also think the EU have shot themselves in the foot politically in the way they have handled it, however you do seem to have missed the basic point of the scheme somewhat.

'There is a far simpler method that could be used, and that is to calculate the average carbon emissions based on fuel consumption, and leave it at that.'

That is exactly how EU ETS monitoring works. To calculate emissions, you simply multiply fuel burn by 3.15. In fact, small emitters can use the Tool created by Eurocontrol which estimates fuel burn, then uses this standard factor - so it is a double estimation. The difficulties operators are having is in the control environment around the reporting to ensure that everyone has a level playing field, not with the data itself and you'd have to have the same rules to prevent someone from dodging a tax on that basis.

'No one knows why the EU ministers chose such a complicated method to account for carbon emissions...Actually, there is a much easier way to motivate anyone—airline or individual—to cut carbon emissions: raise the fuel tax.'

Aside from the fact that a straight forward tax would just result in more fuel ferrying, which raises emissions, the reason why an emissions trading scheme was chosen is that it allows industries to work together to reduce total emissions where they can be done so cheapest rather than trying to reduce aviation emissions in isolation. If it is cheaper for emissions to be reduced in a power plant than an airline, the airline can purchase an allowance from the power company to fund the investment to make their reduction and the total CO2 from the two companies goes down. With a tax, the airline would have to pay it, and the power plant wouldn't receive the capital to invest in the technology to reduce emissions, and emissions stay the same. The ETS isn't an aviation specific thing, and it needs to be viewed in a broader context to be understood properly.

I would question if it is fair for the sector to have to fund other industry's reductions considering the economic and social value airlines (and business operators) bring relative to their total emissions (and profitability), but nonetheless, this is the reason why an ETS was chosen over a tax. In fact, if DHL or Emirates emit the same amount of CO2 in 2012 as they did in 2010 (unlikely though it is), they will actually profit from the scheme as a reward for being efficient, whereas they wouldn’t under a tax.

Jeff Gazzard's picture

So corporate jet pilots are planning "avoiding landing at ETS participants’ airports and overflying European airspace." Why? Simply to practice a wilful bit of tax avoidance and not pay a few € for each polluting plutocrat passenger? Good luck with that! When fuel costs exceed the ETS charge on a flight, I think even billionaires will notice and protest.

Meanwhile over in the real world, here's just one example of what's actually hapening despite the overrblown rhetoric of some commentators. The Sky Team alliance is complying with Europe’s aviation ETS regulations and includes both Delta Airlines, one of America’s largest carriers, and China Southern, one of China’s fastest-growing airlines.

And ALL the world’s airlines that fly into and out of the EU have consistently registered at each and every stage of the ETS programme with their respective European regulator. These actions (not words!) indicate – to me, at least! – that in this somewhat phoney war, the EU has won, as the other camp, the world’s airlines, have already effectively surrendered.

Here is a snapshot of how ticket prices are already being impacted:

• Etihad Airways, Abu Dhabi’s carrier, has increased the fuel surcharge on all its flights to Europe to counter the costs of the EU’s Emissions Trading Scheme by USD$3 per passenger for flights into and out of Europe and 0.03 cents per kilogram for cargo shipments
• Delta Air Lines, American Airlines, United Continental and US Airways say they have already added a $3 surcharge each way on tickets for flights between the United States and Europe
• ryanair introduced a €0.25 levy per passenger per flight from 17th January to cover its’ ETS costs
• Air France/KLM, British Airways and Lufthansa have each added ETS costs to ticket prices via an increase in their existing fuel surcharge although the actual amount is a little opaque
• and many other airlines, such as Thai Airways, have already been buying carbon permits, taking advantage of the current record low prices of around €7.9 per tonne of carbon.

These are low, low pass through levels that will not bring about the collapse of air transport as we know it! Now call me naive but this is compliance, is it not? It is sad but true that all the countries who met recently in Moscow appear simply to want to bring about the complete collapse of the EU ETS, nothing more, nothing less.

We know today that growth in global aviation fuel use and emissions through to 2050 unfortunately outpaces the very best that airframe/engine technology, improved ATM systems and smart operational techniques have to offer.

And this includes the rather witless promotion of unsustainable biofuels as part of the industry’s PR-led attempt to manufacture consent for unlimited growth. They have nothing to offer but a high carbon future. This is not a destination we should all be hurtling towards at 39,000 feet and 500 miles per hour.

The EU rightly continues to stand firm to protect the integrity of the aviation ETS which clearly should be developed as the global market-based element in a worldwide programme to control and reduce damaging climate change emissions from civil aviation. And, yes, this will include the pullutocrats in their shiny playthings!

Jeff Gazzard
Aviation Environment Federation
LONDON

Neil's picture

Jeff

One person saying in an online blog that business jets are taking steps to avoid the scheme does not mean it is actually happening - it would only save about €225 for a GV to stop in the Isle of Man en-route to London - not really worth the extra fuel, landing fees or time. The cost of allowances needs to be much higher to make it worthwhile - and if it does become cost effective, they have a right to do it! Public companies will face PR issues if they try to avoid it, and there is nothing that can be done about private individuals.

And why are you constantly listing the compliance of various airlines? I have seen you make similar posts in comments section of just about every article about the ETS - what exactly is your point? There are fines in place for those who don't submit plans, and the cost of allowances are low so if there is a chance they might lose the fight, they might as well buy now and sell them later if they don’t need them. Airlines are mostly public companies, and have a duty to their shareholders to avoid fines and minimise costs. The fact that they are complying at the same time as campaigning to have the law changed isn't the hypocrisy you are making it out to be. A mugging victim isn't a hupocrite for calling the police after handing over their wallet.

I also don’t see this ‘surrender’ from ‘the other camp’. Chinese, Indian and Russian governments have instructed their airlines not to comply, and the US bill is still working its way through their legislative process. ICAO have formally condemned it, and the only support it has is Australia and NZ, both of whom have their own schemes which cover domestic, but not international emissions...I wonder why...

Jeff Gazzard's picture

Nice try, Neil! "A mugging victim isn't a hypocrite for calling the police after handing over their wallet" - perfectly true. But neither airlines nor their passengers or shareholders are actually being mugged, an unlawful act, are they?

Airlines for America, supported by IATA, lost their anti-ETS case comprehensively in the European Court of Justice late last year. Their group think (including yours, I feel) may still be that they are being mugged by aviation's ETS inclusion. Poor things. Or as some might say, losers.

But as you correctly state, I try to point out wherever possible that there are a number of actions being taken by airlines right now to comply with the EC's legislation in full - this side of the story is, I believe, as important to communicate as the fanciful actions of the coalition of the unwilling.

You are right too to point out that Matt Thurber's comments concerning corporate jets and potential ETS-avoiding re-routing options are, in reality, not worth the effort. That makes 2 of us who think so! And that's what comment sections are for, I would venture to suggest. Feel free to chase me around the web as you see fit - I much prefer picking sophistry apart to being insulted by a rag-tag assortment of climate change deniers as is often, sadly, the case!

And for those who doubt the efficacy of aviation's inclusion in the EU ETS, the IATA report from January 9th 2007 entitled "Financial impact of extending the EU ETS to airlines" is a cracking read. That'll be the same IATA who are still attempting to collapse the ETS. This is not leadership, just wilful obstructionism.

Jeff Gazzard
Aviation Environment Federation
LONDON

Neil's picture

Firstly, a mugging is not only illegal, it is also immoral and divisive between the two parties. I am not sure applying a tax to activity by a foreign citizen in their own (or any other's) country is necessarily the best way for a political entity to work with the broader world, whether it is legal or not. And the level of resistance to this demonstrates that.

Secondly, you accuse me of insulting you. I don't find someone disagreeing with me to be an insult as long as they justify their opinion, which is what I believe I have done. If you felt I have insulted you, I apologise, it was not my intention, though I can't really see how I have.

However, I do find someone implying that I am a climate change denier to be an insult when I made no comment to that effect. It is interesting that you have chosen to use the word 'sophistry' when you still haven't actually explained why the fact that several airlines have complied with the legislation while arguing against it to date is important.

Look, I accept that there are political issues outside the environmental impact of the scheme propping up the opposition to the scheme, but there are also legitimate concerns about the way it has been set up. To dismiss them all as being biased by climate change denial is unfair.

Nasser's picture

With all said and done, I request a simple and convincing explanation by any expert. Why charge an airline from the point of departure instead of applying the charges only when flying over european airspace? I would appreciate even if I could be emailed the answer to my question. Thank you.

Neil's picture

Hi Nasser

You haven't given an e-mail address, so I'll just answer here.

There are two reasons, the first and most important of which was that it was a political decision. They have included a clause in the legislation that exempts flights from other countries if those countries create their own equivelent measures. They haven't set any criteria for equivelent, but the basic point is to motivate other countries to set up their own measures.

The other reason is that it would be difficult to do. You would have to use Eurocontrol data and standard fuel burn rates rather than actual fuel measurements to know how much CO2 was emitted within EU airspace, which would make it less accurate across the board, though Eurocontrol claim their Support Facility is 0.5% accurate.

The main problem with working of estimates based on when you enter airspace is that you would have to use generic fuel burn rates. So if you have two aircraft, one with winglets fitted, and another without, there is no way to differenciate the fuel savings, thus removing the incentive to invest in them.

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