Carbon Cuts Loom for Airlines as ICAO Eyes Global Market

Airlines worldwide face limits on their greenhouse-gas emissions as nations from the U.S. to Russia and the European Union are set to decide on a road map for a global market by 2020.

The International Civil Aviation Organization will vote today at a plenary meeting on a deal approved yesterday by the agency"™s leaders. It would bind them to set final details by 2016 regulating emissions from the $708 billion industry. The deal for airlines, responsible for 2 percent of pollution worldwide, is unprecedented for a single global industry.

In a blow to the European Union, envoys gathered in Montreal declined to validate its plan to include aviation in the EU emissions trading system prior to the start of the international program. Russia, Argentina and others rejected the 28-nation EU"™s offer to scale back the geographic scope of its carbon curbs on airlines in exchange for a global commitment to reduce pollution from the industry.

"We are happy that multilateralism has prevailed over unilateralism," T.S. Tirumurti, joint secretary at India"™s Ministry of External Affairs, said in an interview. "We"™re committed to working toward a global market-based mechanism."

How to regulate emissions for jetliners made it to the top of the ICAO agenda after the EU expanded its carbon market in 2012 to cover carriers, a step that triggered protests from China and Saudi Arabia to Brazil.
Carbon Market

Europe, which wants to lead the effort to cut greenhouse gases linked to climate change, has said its goal was to encourage an international solution to aviation pollution. The EU"™s carbon market, the world"™s biggest, started in 2005 and allocates tradable emission permits to power plants, factories and airlines, which must surrender them to cover discharges.

EU carbon allowances for December have more than doubled from a record low in April to trade at 5.19 euros ($7.06) a metric ton on ICE Futures Europe exchange in London today. Benchmark EU aviation permits last traded in March after falling 50 percent since the start of the year.

The compromise deal proposed by ICAO assembly President Michel Wachenheim requests that the agency"™s 36-nation Council finish work on technical aspects and options for a global carbon market. The outcome will be reported to the agency"™s next triennial assembly for a decision. The U.S. helped achieve an agreement on the resolution, said a U.S. official who asked not to be identified, citing policy.

"It was a difficult day, but at the end of the day we managed to build the consensus," said Henrik Hololei, head of cabinet for EU Transport Commissioner Siim Kallas.
New Technologies

ICAO has taken a "significant" step toward addressing greenhouse gases from aviation, according to Anthony Foxx, the U.S. secretary of transportation. "The resolution advances President Obama"™s commitment to address climate change and ensures that all airlines are treated fairly wherever they fly."

The resolution also encourages nations to develop new aircraft technology, adopt carbon-dioxide standards and use sustainable alternatives to jet fuels.

Envoys voted 97 to 39, with nine abstentions, to remove a provision that would allow the European Union to continue a limited market for carriers. Instead, the measure encourages member states to engage in talks on designing new carbon markets and implementing existing programs. The deal also initially exempts routes to and from developing states if their share of international civil aviation is less than 1 percent.

"There"™s a very good deal on the table" in Montreal, Pia Ahrenkilde-Hansen, a spokeswoman for the EU, told reporters in Brussels today. "We have always said the EU is ready to amend its legislation to reflect a global deal."
Trade War

The EU, which suspended its carbon curbs on foreign flights for a year to facilitate the ICAO talks, will now have to decide if the global deal is strong enough for it to relax its own emission rules. The freeze on EU regulations for emissions for aviation will expire automatically next year unless the bloc"™s regulator proposes to renew it. That would return the system to its original design, where flights to and from Europe were subject to greenhouse gas limits on their entire length.

Restoring full EU curbs on international routes would mean a trade war, and if it takes place, major countries won"™t comply with the bloc"™s carbon rules, Prashant Sukul, India"™s representative to ICAO, said earlier this week.
Flight Curbs

Before Europe suspended carbon curbs on foreign flights, President Barack Obama signed a bill shielding carriers including Delta Air Lines Inc. (DAL) from the EU legislation. Russia announced it was considering limits on European flights over Siberia as part of possible retaliatory measures. Airbus SAS said in June that 27 orders from China for A330 wide-body jetliners are in limbo after the government there froze the contracts as part of a campaign against the EU plans.

ICAO took one step forward and half a step back yesterday by restricting individual countrie"™ ability to implement measures to cut aviation emissions prior to a global system, the Environmental Defense Fund said.

"On one hand, ICAO has opened a door to the possibility of a future global cap on these emissions and an array of…

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