Icao progress could trigger EU ETS change — BA

London, 10 August (Argus) — Progress through the UN's International Civil Aviation Organisation (Icao) could be the trigger to enable the EU to amend its emissions trading scheme (ETS), environmental chief British Airways (BA) Jonathon Counsell said.

“They could amend it so that it only covers emissions that take place within EU airspace,” he said. This would still cover international airlines. “Covering only intra-EU flights covers only 10pc of the emissions covered under the existing scheme, while covering the EU airspace covers approximately 40pc.” It is possible that an EU airspace scheme could be implemented in the next couple of years, he said.

Another option would be an exemption on inbound flights to the EU. This option could be implemented more quickly because it is a possibility within the original directive.

BA has concerns about the current scope of the scheme, Counsell said, adding that they will still be in full compliance. BA is active in the markets to ensure that it covers its carbon emissions exposure. The projected compliance costs for BA's parent company IAG are €90mn ($110mn) for this year.

A global deal developed through Icao is preferable to aviation's inclusion in the EU ETS. “A well-designed EU ETS could act as a first step towards a global deal,” Counsell said. But this deal could take years to implement.

EU climate action commissioner Connie Hedegaard said in June that Icao had made progress towards a global airline emissions market by limiting the options under consideration and should reach a final decision by November. It is unlikely that a fully signed deal will be agreed within this timeframe, Counsell said. “It is a massively complex process, negotiating on potential options and it will be a number of years until a final deal is implemented.”

BA supports the EU ETS as a first step towards a global deal, but Counsell emphasised that the airline does not view the current scheme as appropriate. “International dispute is driving retaliation and non-compliance by other countries,” he said.

The European Commission is in dialogue with Chinese authorities about a proposal for their own, alternative scheme to reduce airline sector emissions, to see if it could be accounted as an equivalent measure. BA is worried that if the commission grants Chinese airlines exemption from the scheme, it could lead to competitive distortion. “Unilateral exemption is concerning because it could leave to competitive distortion,” Counsell said. “Our preference is to link EU ETS scope reduction with progress towards a global scheme.”

One option that Counsell cites is that those countries that sign up for a global deal through Icao could then be given an exemption on inbound flights. “This is a good way forward — to create leverage to deliver a global scheme.”

Aviation's inclusion in the EU ETS has from the start elicited widespread opposition and even threats of a trade war from countries such as the US, China, Russia and India. Non-compliance or retaliatory measures from countries could further exacerbate competitive distortions, Counsell said. Counsell cited a group called the coalition of the unwilling, which gathered in Moscow, Russia, in February to consider potential retaliatory measures, including restrictions on flights to their countries, as well as seeking a recovery of costs.

“Thus, we have concerns about the current scope because we think it is driving member states to not comply or retaliate and we are lobbying the EU to come up with an amended scheme to avoid this risk.”

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