EU Emissions Trading Scheme

The EU has a “cap and trade” emissions control system called the Emissions Trading Scheme (ETS). You should read the Wikipedia link, it makes for interesting reading. The first phase saw a net increase in European emissions and significant carbon pricing volatility.

Recently the EU has bundled aviation into the system, requiring airlines to purchase credits in the system. That system was widened to include any flights departing or arriving from an EU airport. Obviously quite a few countries took issue with this, including the USA. The USA actually passed legislation barring US airlines from paying into the ETS. The USA has proposed an airspace-based system, making airspace over international waters essentially exempt. Airline lobbying groups obviously influence the American stance on the issue:

Airlines for America (A4A), the U.S. airlines lobby, continues to campaign against any market-based mechanism, such as a carbon market, for the rest of the decade, preferring an approach which focuses on improving “technology, operations and infrastructure”.

Eyes have turned to the ICAO to see if they can reconcile differences among aviation markets and develop a global emission control system. The EU has recently suspended the ETS for international flights (flights departing and arriving inside the EU still have to participate). This suspension is set to expire at the end of the year if no ICAO-based solution is agreed to and implemented.

This report from Reuters, based on research published by Manchester Metropolitan University (MMU) in the UK, gives an idea of the emission targets that the EU wants to see:

…the report explored likely growth to 2050. By then, EU road maps state carbon emissions from all sectors must fall by between 80 and 95 percent versus 1990 levels to limit global warming to 2 degrees Celsius, the level scientists say is needed to avoid the worst effects of climate change.

I can see where emissions levels that ambitious leaves little choice but to artificially restrict emissions. Improvements in technology, operations, and infrastructure are not likely to bring that kind of reduction, especially given the growth of the aviation industry.

However, placing an artificial cap on emissions is, in effect, putting a cap on the amount of air travel that can occur. Airlines aren’t going to pay for those carbon credits out of their own pockets, they are going to pass the costs on to travelers in the ticket prices. Higher fares means demand will decrease. In an industry with a profit margin of 1%, this is going to be quite disruptive to the airlines.

What if more realistic goals were set? Could we then turn our focus toward working with what we already have?

What if all this money being passed around in an artificial carbon market was instead used for technological research and development? Or infrastructure improvements? Or operational streamlining?

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