EU bullish as opponents confirm aviation trade war threats

23 of the countries meeting in Moscow to oppose the ETS signed a joint agreement that sets out 8 “counter measures” that signatories could take to try to force the EU to ditch ETS plans.  [6 of the signatories, Cameroon, Chile, Cuba, Guatemala, Paraguay, Uganda, have no carriers covered by the EU ETS]. The 23 countries would “consider” measures and actions if the EU failed to respond.  Canada, Egypt and the UAE abstained from the final agreement.  An earlier draft suggestion on re-opening existing wider trade agreements was dropped from the final text. EU data shows the ETS will have a negligible impact on ticket prices, adding €1.34 to the cost of a flight from London to New York or €0.76 to the cost of a flight from London to Moscow. Despite threats of trade wars and retaliation, the EU remains adamant it will not change or postpone its legislation.

Brussels sources insist they will not cave in to sabre-rattling at Moscow meeting

By James Murray

23 Feb 2012 (Business Green)

More details have emerged from the Moscow meeting of more than 25 countries opposed to the EU’s aviation emissions trading scheme (ETS), outlining how governments plan to ensure airlines’ inclusion in the scheme is “canceled or postponed”.

A copy of the final agreement, obtained by BusinessGreen, sets out eight “counter measures” that signatories could take to force the EU to ditch plans that effectively impose an emissions levy on all flights in and out of the bloc.

Crucially, the signatories, which include Russia, the US, China, Brazil and India, agreed that they could use legislation to “prohibit airlines/aircraft operators of that state from participating in the EU ETS”.

The agreement also sets out a raft of retaliatory measures, including proposals to impose additional charges on EU airlines, mandate EU airlines to hand over data, review existing bilateral aviation agreements, and suspend current and future negotiations on new routes and landing rights.

Separately, the document includes a number of lobbying measures, such as plans to call on European airlines to step up complaints to the EU, file a formal dispute resolution request with the International Civil Aviation Organisation (ICAO), and consider whether the EU scheme is consistent with World Trade Organisation (WTO) rules.

However, an EU source told BusinessGreen the bloc has no intention of backing down and would welcome further negotiations at the ICAO.

“Our position remains the same: we want an international agreement that has the same level of ambition as our scheme – we want this to go to the ICAO,” he said, adding that the bloc has yet to have concrete confirmation from any country that retaliatory measures will be taken.

There have been reports that the Chinese government has banned airlines from taking part in the scheme, while Russia indicated yesterday that it could take similar steps. But the EU maintains that it has not had any formal confirmation from either country that bans will be imposed.

The spokesman’s comments were echoed by EU climate change commissioner Connie Hedegaard, who used Twitter to challenge opponents of the EU ETS to put forwards a “concrete, constructive alternative”.

There was also evidence yesterday that the Moscow agreement has been watered down slightly, after the US, wary of a full-blown trade war, insisted that a threat to re-open other trade deals with the EU was removed from an earlier draft, also seen by BusinessGreen.

In addition, despite reports that almost 30 states attended the Moscow meeting, only 23 signed the final agreement, while a number of countries, including Canada, Egypt and the UAE, apparently abstained.

The EU hit back against the agreement yesterday when it released new data showing that the s

Speaking to BusinessGreen, one carbon trader said he is confused as to “what all the fuss is about”.

“We are talking about extremely small sums. Ryanair has put a surcharge on flights because of the scheme but it is about 25 pence,” he said. “There is also a study from MIT which suggests that airlines could actually generate a windfall profit from the scheme with the free allocations.”

Meanwhile, airlines are increasingly worried at the prospect of a trade war that could disrupt new routes and result in further levies, as well as forcing them to either break the law in the EU by not complying with the ETS or break the law in their home states by taking part in the scheme.

A spokeswoman for the Association of European Airlines toldBusinessGreen that the industry urgently wants the EU and its opponents to sit down and agree a new global regime for tackling emissions.

“The last thing the industry wants is a cycle of retaliation,” she said. “We need to stop this vicious circle and get to a concrete solution. The EU’s regional approach is not right, but the non-EU countries are not right to pursue retaliatory measures. We want to see a solution at a global level that is delivered within a reasonable time frame.”



Coalition of states comes up with basket of countermeasures over EU ETS but falls short of a coordinated attack

Thu 23 Feb 2012 (GreenAir online)

Of the 26 or so countries who met this week to discuss measures to derail the EU’s inclusion of third country airlines and operators into the EU ETS, 23 of them signed a joint declaration calling on the EU and its member states to cease application of the directive and said they would “consider” measures and actions if the EU failed to respond.

Even though the tone of the declaration is less confrontational than some expected, it is thought Canada, Egypt and the UAE abstained from the final agreement. The “coalition of the unwilling”, as it has been dubbed, has come up with a list of eight possible measures the signatories could take in retaliation, including filing an Article 84 dispute application at ICAO and prohibiting their carriers from participating in the EU carbon reduction scheme.

An earlier draft suggestion on re-opening existing wider trade agreements and negotiations with the EU was dropped from the final adopted text.

The declaration issued yesterday said the unilateral inclusion of international civil aviation in the EU ETS was an obstacle to the progress of work underway at ICAO to address international aviation emissions, and there had been a lack of constructive dialogue from EU states to address non-EU concerns expressed in the declaration signed after the previous Delhi meeting last September and subsequently adopted by the ICAO Council.

The agreement – signed by the United States – also stressed the importance of the Kyoto Protocol and the relevant provisions of the United Nations Framework Convention on Climate Change (UNFCCC).

It was signed by representatives from Armenia, Argentina, Belarus, Brazil, CameroonChile, China, CubaGuatemala, India, Japan, Republic of Korea, Mexico, Nigeria, Paraguay, Russian Federation, Saudi Arabia, Seychelles, Singapore, South Africa, Thailand, Uganda and theUnited States. Six of the signatories (in italics) have no carriers covered by the EU ETS.
The basket of actions and measures proposed were:

– Filing an application under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO Rules for the Settlement of Differences;
– Using existing or new state legislation, regulation or other legal mechanism to prohibit airlines/aircraft operators of that state from participating in the EU ETS;
– Holding meetings with EU carriers and/or aviation-related enterprises in their respective states and apprise them about the concerns arising out of the EU ETS and the possibility of reciprocal measures that could be adopted by the state, which may adversely affect those airlines and/or entities;
– Mandating EU carriers to submit flight details and other data;
– Assessing whether the EU ETS is consistent with the WTO Agreements and taking appropriate action;
– Reviewing bilateral service agreements, including Open Skies with EU member states, and reconsidering the implementation or renegotiation of the ‘horizontal agreement’ with the EU;
– Suspending current and future discussions and/or negotiations to enhance operating rights for EU airlines/aircraft operators; and
Imposing additional levies/charges on EU carriers/aircraft operators as a form of countermeasure.

The wording of the draft declaration allowed for the inclusion of the announcement that a named state would file an Article 84 application in ICAO but a decision does not appear to have taken place at the meeting. A letter from each of the signatories that was due to be sent to the EU and its member states also did not make it to the final agreement. The draft of the strongly-worded letter said that due to the intransigence of the EU, the sender would not participate in the EU ETS and would be initiating necessary measures to prevent its carriers from joining the scheme.

The coalition of states said they would convene a next meeting in Saudi Arabia in the summer.

On Twitter yesterday, EU Climate Commissioner Connie Hedegaard challenged the opposing states to come up with “a concrete, climate-friendly alternative” to its aviation emissions-reduction scheme.

That no formal coordinated measures or actions were taken in Moscow, only states should “consider” them, was picked up the US NGO Environmental Defense Fund (EDF), who had previously protested at the involvement of the United States in the meeting. “Today’s failure to reach agreement on a coordinated attack indicates cooler heads may have prevailed and, if so, they are to be commended,” said Annie Petsonk, International Counsel at EDF.

She suggested the coalition had heeded recent comments by ICAO Secretary General Raymond Benjamin that an Article 84 intervention would distract ICAO in efforts to design and obtain a global agreement on market-based measures to address aviation emissions. “Had an Article 84 case been launched, that surely would have called into question the seriousness of the claims of the industry and some nations that they truly want a solution in ICAO,” she said.

Petsonk criticised the Moscow participants for not inviting civil society groups to the meeting in order to present “a balanced discussion”, believing the airline industry, through IATA, had been represented.

Following the meeting, the Association of European Airlines (AEA), which represents 33 scheduled network carriers, expressed concern over the implications for the industry with the threat of retaliatory action.

“This situation is totally unacceptable,” said Ulrich Schulte-Strathaus, AEA Secretary General. “Airlines must not be taken hostage by politicians or be forced to compete with serious market distortions. We urgently need both sides to focus on the core objective – managing global aviation emissions – rather than on winning a battle of sovereignty.”

He noted that although there were diverging views on the sovereignty implications of the EU ETS, both sides of the dispute broadly agreed that a global approach through ICAO was best.

“It is not right to attempt to force the EU to change their law,” he said. “Nor is it right to impose European standards on the rest of the world. ICAO is, without doubt, the way forward. Countries must move away from retaliation and counter-retaliation and instead come up with concrete, short-term actions towards a resolution. Then ICAO can deliver.”


Moscow Declaration (pdf)