US Bill Complicates EU Aviation Emissions Initiative

31 October 2011

In the latest salvo in the tit-for-tat aviation emissions row between the EU and several other countries, the US House of Representatives last week passed a bill making it illegal for US airlines to comply with the controversial EU scheme. The move comes in the wake of the release of the European Court of Justice (ECJ) Advocate General's opinion, which found the EU's plan to extend its emission trading scheme (ETS) to aviation to be fully compatible with international law (see Bridges Trade BioRes, 17 October 2011).

Tensions have been escalating in recent months between the EU and a group of countries opposed to the initiative. The group last month adopted a declaration in New Delhi demanding that the EU cancel the inclusion of aviation in the ETS (see Bridges Trade BioRes, 3 October 2011). India, who has taken a lead in the opposition, has said that if the EU does introduce the measure as planned in January 2012 it will retaliate. China, which also opposes the scheme, has already blocked the order of Airbus A380s from Hong Kong Airlines.

The International Civil Aviation Organisation's (ICAO) governing council is expected to adopt New Delhi declaration as well as a set of resolutions calling on the EU to allow non-EU carriers to be exempt from the ETS when the Montreal-based organisation meets this Wednesday. Reuters reports that the ICAO has claimed that the ETS issue poses "major challenges and risks for aircraft operators."

While many observers say they doubt whether this Wednesday's challenge will have any effect on Brussels' plans, some claim there is a possibility that the challenge will be a key step towards a formal dispute procedure, mediated by the president of the ICAO.

The recent developments out of Washington further complicate the dispute as if the bill is also approved by US Senate, thus becoming law, US-based airlines will be put in a difficult legal position. Should they continue to fly to Europe, they would be in breach of US law if they comply with the ETS and in breach of European law should they not. Some experts say the row could lead to a trans-Atlantic trade war.

Alternative fuels?

Despite the strong opposition to the ETS measure from the International Air Transport Association (IATA) and many states, a number of airlines are now taking innovative steps to increase their carbon efficiency and bolster the use of alternative fuels, in part in response to the EU measure. The initiatives, many of which were announced in recent weeks, include fuel replacements, biofuels, and carbon reduction measures. This comes at a time of increased volatility in the price of oil and significant wider political pressure on the aviation industry to take green concerns more seriously.

Despite widespread criticism over the unintended environmental impacts of the use biofuels, Hong Kong-based Cathay Pacific - one of Asia's largest airlines - has announced its intention to "pin its hopes" on the alternative fuel. With almost 20 percent of the company's flights expected to fall under the new ETS rules if implemented on schedule, Cathay is moving quickly to reduce its carbon footprint. As part of its initiative, Cathay Pacific is planning to develop a dedicated supply chain in Asia to ensure a consistent supply of biofuels for itself and its subsidiary Dragonair.

The current generation of biofuels, while ready for commercial use, carry a price premium. In the current economic climate most airlines are unwilling to either absorb this cost or pass it onto consumers.

Other airlines are looking into the possible alternatives to both traditional aviation fuel and biofuels. Richard Branson of Virgin Atlantic claims that he will introduce a "green aviation fuel" within three years. The process he is planning to take advantage of is the conversion of waste gasses from industrial steel production into a fuel-like substance with a price tag similar to that of conventional jet fuel. The technology could reportedly supply 20 percent of global annual consumption of aviation fuel at current levels.

The new technology is currently being trialled in New Zealand. Once the technology has been sufficiently developed, the focus will turn to China, the world's largest producer of crude steel. In 2009 China accounted for over 46 percent of the world's total steel output. Commercial production of the new fuel is planned to get underway by 2014.

ICTSD Reporting; "Airlines ready for next battle against carbon law," REUTERS, 31 October 2011; "Cathay pins hopes on biofuels," SOUTH CHINA MORNING POST, 24 October 2011; "IATA Disappointed with CJEU Opinion - Urges Global Solution through ICAO," INTERNATIONAL AIR TRANSPORT ASSOCIATION, 6 October 2011; "Virgin Atlantic unveils plan to use ‘green' fuel," THE GUARDIAN, 11 October 2011; "European ETS, Biofuels put aviation at a crossroads on environmental issues," CATHAY PACIFIC, 27 September 2011; "India, Russia threaten to retaliate against EU ETS," AVIATIONWEEK, 3 October 2011; "Steel Statistical Yearbook," WORLDSTEEL ASSOCIATION, 2010.

31 October 2011
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