EU's Emissions Trading Scheme

1) What is the EU ETS? Describe how it works and how it will affect the aircraft flying into Europe.

The EU European Trading Scheme is an emissions based regulatory trading scheme developed by the European Union. The ETS was launched in 2005, working under the guise of a 'cap and trading' principle, hence the name 'European Trading Scheme'. The word 'scheme' is usually synonymous with some sort of illegal activity or scam, but that's not the case in this particular scenario. Instead, it's merely something that encompasses the various aspects (network) of how the ETS works. Anyhow, there's a cap and limit on the total amount of greenhouse gasses that can be emitted. Emitted from whom? Factories, power plants, and other various industrial sectors that emit greenhouse-based gasses. The whole ETS is based on reducing overall CO2 emissions. In the grand scheme of things, it's an environmental project. The cap is something that the EU ETS sets for each individual company. The cap is simply an allowance, saying, 'this is how much emissions you're allowed to emit'. Companies can actually sell portions of these allowances (hence the trading principle) to other companies. So, these caps (and trades) have financial value. At the end of each year, the company uses its allowances to 'pay' (cover) for all of its emissions. If that company exceeds its allowance, they'll be heavily fined. Therefore, this goes back to the trading principle and companies whom shift their allowances to other companies whom expect to emit more CO2. As years progress, the EU ETS reduces the amount of the allowances (or caps), slowly but surely. This is usually done via phases, and its intent is to reduce *Overall* emissions over time.

For the environment, this sounds great and all, that is -- until they decided to include aviation in the mix, beginning in January 2012. That's when everything went awry. Once aviation was included in the mix, it included aircraft that would arrive or depart from any point in an EU country. Therefore, the EU ETS now will affect every airline from any other country that arrives at some point in the EU. The EU ETS operates the same cap (allowances) and trade principles for the airlines. The big strife here is that other countries (i.e. -- the USA, China, etc.) now have to adapt to the EU ETS, despite not being an EU member. Therefore, with respect to aviation, countries from around the world are now dealing with European Union emissions standards, despite having nothing to do with the European Union, other than simply flying there.

The EU ETS will affect the aircraft flying to Europe in several ways. The EU ETS is offering 85% emissions under free permits, therefore permitting airlines 85% of their emissions for free, and they'll have to purchase permits for the other 15%. As mentioned, these permits can be traded as necessary. Aircraft wise, I’m sure most airlines will now be trying to operate the most efficient aircraft into Europe, while dumping the least-efficient aircraft into non-EU member countries, thereby avoiding ETS and using as little as their permit percentage as possible. There's a term for this, too, called 'leakage', where other countries will now experience surging emissions as a result of EU ETS companies moving their operations to those countries. In the case of aviation, moving those less efficient aircraft to operate routes into non EU-ETS countries, and the most efficient aircraft to the EU ETS countries.

You can read more about various aspects of the EU ETS ordeal by clicking here.

2) Why is the US (among other countries) upset about the implementation of the EU ETS? What steps is the US government taking right now in response?

They're upset about it because they're essentially being forced to implement foreign policy into their own countries operations, which is pretty ridiculous. To make matters even more ridiculous, the EU ETS measures emissions standards based on total distance travelled, not just the distance in the EU airspace. Therefore, a widespread complaint is that the EU is extending coverage of their airspace (technically) to encompass the world, by using such measuring practices. A valid complaint. Other arguments state that the EU should only measure the distance flown within the EU airspace itself, considering that is the scope of their authority. The EU ETS refutes these claims and stands by its decision to measure emissions based on the total distance travelled. Therefore, a flight from New York to Paris, France, will have its emissions calculated from the moment it lifts off the ground in New York till the moment it touches down in Paris. Many airlines that travel long distances are the most infuriated, particularly Asian and Australian-based airlines, because they state that due to the longer distances they have to travel (Sydney to London, for example), versus Dubai to London, they'll be paying significantly more for permits than their Middle-Eastern counterparts. Therefore, airlines with closer hubs (closer countries) to the EU benefit greatly on permit costs, while those farther away are going to pay dearly in permit costs to keep up with their allowance.

The US Government has introduced a few bills, such as S.1956, which states that if the DOT determines that participation in the ETS would not be in the public interest, then the bill would prohibit airlines from participating in the ETS. Another bill from the senate, H.R. 2594, is essentially identical to S.1956, was also passed on Oct 24th, 2011. ALPA supports both bills, and support against the ETS seems to span across the entire US aviation industry. The US also passed a resolution to ICAO on November 2nd, 2011, approving many actions that oppose the ETS amongst international carriers that are non-EU airlines. The US has also asked the EU to slow the progression of ETS, or stop it with regards to aviation, so that both the US and EU can meet with ICAO and come to a one-all global approved emissions plan. Though, the EU refused, stating that the ICAO hasn't been effective in reducing aircraft emissions, and told the US to work on a global solution while the ETS is still enforced.

3) What is ICAOs response to the EU ETS?

ICAO is in somewhat of a tough predicament. ICAO is usually responsible for these types of issues, however the EU has somewhat taken globalized energy policies under their own guise, developed the EU ETS, and then began a pseudo-worldwide enforcement of their own policies. ICAO has been somewhat ignored in the process. The EU states that ICAO is ineffective (or not effective enough) in reducing emissions standards and, if someone doesn't like the EU ETS, then they need to come up with an alternative global emissions plan. Until then, the EU ETS will be enforced, according to the EU. ICAO is strongly against the EU ETS with regards to including international carriers (non-EU airlines) from being included in the EU ETS. While they state that there is a need to incorporate a globalized emissions plan, they reaffirmed the importance of their own role (ICAO's role) in addressing global aviation emissions. Essentially, they're saying, look -- we're still here, we're ICAO, let us deal with the international issues. Other than that, EU -- you can stick with your EU ETS, but only for your EU member countries (EU member airlines).

Click here to read more about ICAO's response to the EU ETS.

4) What is your response to the EU ETS?

I'm iffy on the EU ETS. While it sounds like an ideal plan (excluding aviation), it also sounds a bit farfetched (when incorporating aviation). Beginning to charge companies on the premise of emissions as a way to get them to reduce emissions is something that may work on a very-long, spaced-out maybe 30-some year plan, but not something that suddenly goes into immediate effect. There simply isn't the technology to deal with such a dramatic decrease in emissions that the EU ETS demands. Forcing companies to pay mass amounts of money makes sense...if they're using 1970's technology. But, it doesn't make sense when they're using modern equipment, and, that's about as far as technology has evolved. All in all, it sounds like a wonderful money making scheme for the EU. That's probably why they're so adamant about including international carriers -- to make money, because they know they will, and a lot of it. In terms of the EU ETS on a global scale with respect to aviation, that's outrageous, as they're taking on ICAO's responsibility by doing so. Moreover, the way they calculate the emissions (based on total distance), is even more outrageous! So the European Union is charging say, Qantas, to fly from Sydney Australia to Paris France, from the moment they take off to the moment they land; even though clearly 70 some percent of the flight is flown over the airspace of non-EU member countries. That's completely ridiculous. Moreover, the EU won't budge on that, either. If the EU wants to have some regulation over emissions, that's fine, but it must be kept within the confines of the EU member countries. Leave it to ICAO to handle it on a global scale.

5) How do you feel that ICAO should manage global aviation emissions?

ICAO has it right by incorporating ICAO-member countries into coming up with one, widespread approved, globalized emissions plan. That's ICAO's job and something they're working on. ICAO should continue to work on it. Unfortunately, the EU ETS has somewhat taken ICAO's job and made it their own job, mainly out of frustration at the pace that ICAO operates at. However, the EU ETS needs to understand that ICAO deals with over 190 countries, which will obviously take significantly more time to incorporate a globalized plan compared to the European Union. ICAO should work with its member countries to develop a global plan for emissions; one that'll be approved for widespread use and can be voted upon, not sternly enforced without say, such as the EU's ETS.