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Airline opposition to carbon trading another blow against Europe’s green agenda

The European Union’s plan to force international airlines to participate in its emissions trading scheme (ETS), thus lumbering them with additional costs, has run into severe turbulence.

On Tuesday, led by the Air Transport Association of America (ATA), a number of major airlines and airline trade associations, including the National Airlines Council of Canada, sought to overturn what amounts to a new EU climate tax at the European Court of Justice in Luxembourg. China has taken an even harder line, threatening a trade war by imposing countervailing taxes, blocking routes or holding up aircraft orders from European aerospace giant Airbus.

While the EU seeks to spread its self-inflicted climate-fighting pain to others, however, it seems to be losing conviction that policy masochism is such a great idea. As the airlines were taking the EU to court, the European Parliament was voting against a plan to increase EU emissions reduction targets from 20% below 1990 levels to 30% below those levels by 2020.

With Alice in Wonderland reasoning, countries that supported the tougher targets — including Britain and France — suggested that since Europe was in such economic bad shape, meeting the targets would be easier. On this basis, what is really needed is a complete collapse of the European economy, which is in fact what many climate catastrophists would appear to welcome.

As for the aerial dogfight, meanwhile, under the EU proposals, airlines would be forced to pay up not merely for their emissions while flying in EU airspace, but for their entire trip. Such legislation, airlines claim, contravenes a number of international agreements, including, somewhat ironically, Kyoto. Under that moribund protocol, the International Civil Aviation Organization (ICAO) has been given the authority to establish greenhouse gas policy for international aviation.

Isaac Valero Ladron, the European Commission’s spokesman for climate-change policy, denied that forcing the airlines to participate in the ETS amounted to “a tax, a levy or a charge.” Instead, he said, it is a “pollution ceiling.”

If memory serves, Ladron is the Spanish word for “thief,” and under this (additional) piece of legislative runway robbery, airlines flying to or from Europe would have to buy permits from the ETS for 15% of their 2010 carbon emissions. They would also be required to cut emissions by 3% in 2012, and by 5% from 2013 onward, based on average emissions between 2004 and 2006. All this, it is estimated, would cost airlines over US$1-billion next year and US$4-billion by 2020. Those costs would almost certainly be passed on to air travellers.

Significantly, airlines did not dare to blaspheme against the Church of Gore the Peacemaker. Otherwise how could they justify asking their passengers to buy carbon credits? According to the ATA’s lawyer, Derrick Wyatt, “The airlines recognize that greenhouse gas emissions, including those from aviation, pose a serious environmental problem. But the airlines consider that the only way of ensuring a coherent framework for reducing emissions from aircraft is through multilateral agreement, rather than through unilateral and piecemeal regulation, which can only lead to chaos at the international level.”

While there is no doubt about the potential for legislative chaos — which is otherwise known as bureaucratic job creation — one might well doubt the sincerity of such climate conviction. Increasingly, the preferred strategy to deal with the threat of barmy legislation is to insist on total commitment to a truly global solution in which everybody has to participate. Otherwise there’s no point. So it’s on to the next cast-of-thousands meeting.

The airlines’ opposition to buying allowances marks yet another blow to the ETS, which has been the cornerstone of the EU’s “market-oriented” solution to the threat of man-made climate catastrophe. However, as Nigel Lawson, former British chancellor of the exchequer and founder of the Global Warming Policy Foundation, has pointed out, the ETS is not a market mechanism at all but a “government-controlled, administrative rationing system,” which is subject to horse trading and prone to corruption.

The ETS is already reeling under the burden of cyberscandals and wild swings in prices. Its putative U.S. equivalent, which was staunchly promoted by the Obama administration, has been killed stone dead, leading to the shutdown last year of the Chicago Climate Exchange. Indeed, outside the EU, emissions trading is virtually non-existent.

The ETS was rigged from the start since European countries all sought to set their own caps as high as possible so as not to cripple their domestic industries. This meant way too many credits and an initial price collapse. The market has since been beset by fraud. Last week, carbon prices in the ETS completed a seven-day decline of almost 20%, a reflection of low economic activity and companies dumping permits to boost first-half profits.

The world’s airlines are right to fight against being forced into the ETS, even if they hypocritically claim that what they really want is a global trading scheme that makes them — and air travellers — all suffer equally. Let’s hope they are really flying in a holding pattern until climate catastrophism is finally shot down.

Financial Post, 6 July 2011