EU Votes to Include Airlines in Cap-and-Trade System

EU Votes to Include Airlines in Cap-and-Trade System

The European Parliament voted Tuesday to bring into the fold of its cap-and-trade system all airlines that fly to or from Europe beginning in 2012.

The vote caused an uproar from non-EU carriers struggling against high jet fuel prices that show no sign of abating. Aviation trade associations promised to fight the legislation in the courts, arguing the action is illegal and will be of little environmental benefit.

"The EU's unilateral grab of power over U.S. and other non-EU airlines wherever they are in the world is a clear violation of the Chicago Convention," James May, president and CEO of the Air Transport Association, a trade group representing U.S. carriers, said in a statement. "The EU decision to move forward with this legislation is sure to spawn a legal challenge."

Under the legislation, airlines must reduce emissions 3 percent in 2012 based on 2004-2006 levels, and by 5 percent in 2013. That means emissions certificates covering 97 percent of the industry's emissions will be issued in 2012, dropping to 95 percent the following year. Eighty-five percent of the certificates will be allocated, with the remaining 15 percent selling at auction. Light airplanes, low-emissions carriers and flights for humanitarian, military, research and emergencies are excluded from the rules.

Airlines produce between 2 percent and 3 percent of all emissions in the EU and U.S. That percentage, however, is growing in the 27-nation EU and will likely double by 2020, according to the European Commission.

The ATA argued the action doesn't take into account that its carriers, which represent about 90 percent of U.S. passenger and cargo traffic, have committed to improving fuel efficiency 30 percent by 2025. A modernized air traffic management system could boost efficiency by another 15 percent.

The International Air Transport Association estimates the cap-and-trade system will cost the global aviation industry nearly $5.5 billion. By 2020, airline tickets could rise between $7 and $62 for each return journey, depending on the trip length, according to the European Commission's impact statement.

Revenue from the auction should expressly target climate change, said Peter Liese, EP rapporteur on emissions.

"Money should be used to tackle climate change and not disappear somewhere in the general budget. It is not a tax but an environmental instrument," Liese said. "This is why we are very engaged in this field. The agreement is not perfect, but the Council went further than on any other comparable occasion."