Bloomberg News

EU Plans to Exempt Foreign Flights From Emission Costs in 2012

November 13, 2012

The European Union won’t reintroduce emissions-trading obligations on flights into and out of the region for 2012 even if United Nations negotiators fail to agree next year on a deal to limit discharges from airlines.

The freeze on compliance with EU carbon rules for foreign flights, announced yesterday, is intended to facilitate international talks about emission curbs on airlines. The compliance requirements for all flights in 2013 remain unchanged, an EU official said in Brussels today.

The 27-nation EU decided in 2008 that flights to and from European airports should be included within the bloc’s emissions trading system, the world’s largest, from this year after airline emissions in the region doubled over two decades. The enlargement of the European cap-and-trade program triggered opposition from countries including the U.S., China and Russia.

Progress at a meeting of the United Nations’ International Civil Aviation Organization last week made a global deal on emissions from airlines “within reach” next year, EU Climate Commissioner Connie Hedegaard said yesterday, when she announced the regulator’s plan to freeze the enforcement of European carbon rules on foreign flights.

ICAO Deal

Should ICAO negotiators fail to reach a deal next year, the ETS requirements for all flights will automatically resume, obliging carriers to submit permits to cover all their 2013 carbon discharges by April 30, 2014. The draft measure is not retroactive, meaning even without a deal operators of flights into and out of the EU won’t need to pay for emissions in 2012, said the EU official, who declined to be identified, citing policy.

Under EU law, the commission should consider whether changes to the emissions program are necessary in the light of a global agreement.

The draft measure will need support from member states and the European Parliament in a process that can take several months. A delay in approval beyond April 30 should not impact the proposed freeze as national governments don’t act against a proposal tabled by the commission in such situations, according to the official.

The freeze wouldn’t apply to flights within Europe, whose operators will have to submit permits matching 2012 discharges from such flights by the end of April. It won’t affect 2013 allocation and auctioning plans either, the official said.

Annual Limit

The EU ETS is the cornerstone of the region’s plan to cut greenhouse gases that scientists blame for global warming. It imposes pollution limits on more than 11,000 manufacturers and power companies, leading to a cap in 2020 that will be 21 percent below 2005 discharges. Emitters have to submit one emission permit for every metric ton of CO2 they discharge or pay a fine of 100 euros per ton.

The annual limit for the aviation industry began at 97 percent of average discharges from 2004 to 2006 and will fall to 95 percent in 2013. This year’s cap for the EU’s 27 member states and Norway and Iceland, which also participate in the ETS, was set 214.8 million allowances.

Airlines that joined the ETS this year were given emission permits making up 85 percent of the industry cap for free and will have to buy the remaining 15 percent at auctions. They can also trade among themselves.

The proposed freeze would affect around two-thirds of flights, the EU official said. The commission will revise the number of permits to be auctioned this year, potentially cutting the volume to about 8 million from about 32 million metric tons, and will cancel free allowances given to carriers for international flights, according to the official.

Airlines that already sold free allowances that are to be canceled will need to buy them back, the official said. EU permits for delivery in December traded 6.9 percent down at 8.45 euros as of 5:06 p.m. on the ICE Futures Europe exchange, down 20 percent from a year ago.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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