EU votes to limit airlines' emissions

By James Kanter
Published: October 24, 2008

European Union governments on Friday gave formal approval to a potentially costly system capping greenhouse gases from any airline flying into or out of the trade bloc - just as the airline industry reported new evidence of its business being hit by a worsening economy.
Airline chiefs immediately blasted the EU decision, saying it would cost the industry at least €3.5 billion each year to comply. The EU was "acting in a bubble - even in the middle of a global economic crisis," said Giovanni Bisignani, the director general of the International Air Transport Association.
EU justice ministers meeting in Luxembourg approved the greenhouse gas measures, which oblige airlines, regardless of nationality, landing or taking off from an airport in the EU to join the emissions trading system from January 1, 2012.
The system, created in 2005, already includes heavy industries like cement makers and electricity generators in Europe.
Industries have complained bitterly about the costs of complying with the system, especially as the global economic situation has worsened. Many airlines also have fought hard to avoid inclusion in the system, saying they could ill-afford the extra costs after a period of record high fuel costs.

The United States has also harshly criticized attempts to apply the EU rules to U.S.-based carriers, insisting the rules violate international aviation agreements.
The decision Friday was expected, however, after European governments reached a political agreement with the European Parliament in June.
It came as the International Air Transport Association reported global airline-passenger traffic fell 2.9 percent in September, compared with a year earlier. It was the first monthly drop since the outbreak of severe acute respiratory syndrome in 2003.
A drop in air freight of 7.7 percent was the first since the market for technology stocks crashed in 2001, the transport association said.
In another sign of gloom in the industry, the largest European airline, Air France-KLM, warned its earnings would suffer as a result of the financial crisis, sending its shares down sharply.
The airline said it was struggling to reach a full-year operating-profit goal of €1 billion for the 12 months through March 2009. Air France-KLM vowed to curb capacity and freeze costs, but said it would "remain comfortably in profit as long as market conditions do not deteriorate any further."
The inclusion of aviation in the carbon trading system will raise costs for airlines, which pay for a portion of their emissions permits to comply. The system also will raise costs for passengers if airlines, as expected, pass on the costs by raising ticket prices.
EU climate officials say it is vital to regulate greenhouse gases from aviation because the sector is growing so quickly.
Low-fare carriers like Ryanair, based in Ireland, have made short hops by air accessible for many more Europeans. Even so, the measures approved on Friday include special provisions that could ease the rules on start-up airlines in faster growing EU economies, like those in Eastern Europe.
New airlines or airlines growing at more than 18 percent annually would be eligible for a once-only limited supply of additional free permits. That measure would ensure that countries "with initially very low but increasing mobility rates are not penalized by the scheme," EU governments said in a statement. The airline industry says its gases represent a small fraction of greenhouse gas emissions and that the European measures will be ineffective without a global agreement. Environmentalists say the effect of vapor and emissions from jet engines at altitude could magnify their effect on the climate.