ETS in the South China Morning Post


22 February 2012

In response to a rather frankly-worded opinion piece in the South China Morning Post (Beijing’s stance on airline emissions stinks of hypocrisy - behind a paywall), ATAG responds with a letter to the editor which can be read after 'read more':


Sir,

Tom Holland (Beijing’s stance on airline emissions stinks of hypocrisy, SCMP 21 February) makes a number of assertions about China’s stance on the EU Emissions Trading Scheme (ETS) and that of the aviation industry in general which are simply not true.  Like many other countries, including the United States, Russia and India, China has expressed its concerns regarding the extra-territorial nature of the EU ETS when imposed on non-EU based airlines where it has no jurisdiction. As for Mr. Holland’s claims about China being a beneficiary of an EU ETS because of its involvement in the carbon credits (CERs) market, the fact is that China is a world leader in developing green technologies. This is a key factor in its ability to generate CERs and the very raison d’etre of emissions trading - to incentivise countries and industries to make investments in cleaner technology in order to reduce overall emissions.

Your commentator also refers to the recent Barclays Capital study challenging the cost impacts of the EU ETS to airlines.  Although the current price of carbon is low, the long term carbon pricing trend is upward and, if as seems likely, the European Commission seeks to act to stimulate demand by reducing the volume of so-called ‘free allowances’ to airlines in later years of the ETS, prices will inevitably rise and the cost impacts will undoubtedly increase.  The extent to which airlines could pass on these costs to passengers is also far from clear given the challenging trading environment in which airlines operate. It is all very well to say that the cost per ticket is ‘only HK$219’, but when the margin of profit on that ticket is a similar amount, you can begin to see the issue for airlines. To say that the UK government’s air passenger duty is a lot higher is true – our major concern in the long-term is the layering effect, with tax upon tax upon ETS upon levy meaning that ordinary people will be priced out of the market for travel.

Mr Holland’s wider criticisms of airlines should also not go unchallenged.  He says that the European Union had to act to include aviation in its ETS because the industry and the UN were not moving fast enough. To make it clear, airlines are not against emissions trading per se, nor does the aviation industry want to shirk environmental responsibility. In fact, our industry is world-leading when it comes to fuel efficiency - it's in the nature of our business. The latest aircraft entering the fleet, for example, have the same per-passenger fuel use as small family cars.  But the response from governments has been to impose punitive taxes and charges such as the UK’s Air Passenger Duty (APD) and now the EU ETS, levied in the name of the environment, but neither of which guarantee that any revenue generated will be redirected into climate change initiatives. 
 
We have been pushing for a global framework for dealing with aviation emissions at ICAO for a number of years. But any system must be global, transparent and fair if it is going to work properly. Air transport is a global industry; we need global standards and global policies. Regional systems will simply create market distortions and - as we have seen with the protests over the European ETS - diplomatic tensions. The Europeans’ determination to push through their regional, unilateral system has simply distracted from the progress that could have been made by the 194 governments at ICAO. In fact, environmental groups and even the EU will admit that a global scheme is the best way forward.

Our hope is that governments will not allow the EU ETS debate to distract them and can work together for a global agreement before the ICAO Assembly next year. In the meantime, we will continue to work to improve our fuel efficiency even more than the 70% improvement seen since the start of the jet age. The $178 billion that jet fuel cost airlines in 2011 is incentive enough.

Yours,

Paul Steele