Is the fight between the European Union (EU) and several countries including the US, China, Russia and India about the decision of the 27-nation EU bloc to come up with a new law for airlines, commonly known as the EU-Environment Trading Scheme (EU-ETS), a breach of international law? Globally, over a 100 countries will be impacted by the EU's law, which came into effect on January 1 this year.
Or does the international community fear that not protesting against the new law could have great economic consequences? The answer lies somewhere in the middle.
According to the EU, there is a need to include the aviation sector in ETS because even though emissions from the aviation industry account for just 2-3 per cent of global greenhouse gas emissions, they are set to grow rapidly. Even assuming 2 per cent per annum efficiency savings, the International Civil Aviation Organisation (ICAO) estimates that emissions from the sector will grow by up to 88 per cent between 2005 and 2020, and by up to 700 per cent between 2005 and 2050.
Why didn't governments protest against this law earlier? Talk to officials in India and they are largely silent on why there were no suggestions put forward that the carbon measurements should only be for the duration of the flight in European airspace, rather than from the time that an aircraft takes off from anywhere in the world till it touches down in Europe.
The implementation of the former proposal would have meant less financial burden for Indian carriers. The two private sector operators from India — Jet Airways and Kingfisher — estimate that the new law could put an additional annual financial burden of $30-40 million on them.
Governments are now reacting. But the way they are proposing to do so could open a Pandora's box.
Tariff wall
To begin with, the global community is planning to block the law through various retaliatory measures, including forming a tariff wall around Europe. India, Russia, China and a few other countries are thinking of imposing a larger fee for European airlines. This measure makes sense because all European airlines have to overfly Russia and then India as they take passengers to the Far East, and beyond. According to one school of thinking in India, this move will sound the death knell for European carriers.
Plans are also afoot for sending letters of protest against EU's law, asking it to either reconsider the law or not to bring it into force for another year. And there is also talk of one country, possibly the US, seeking arbitration against the EU under Article 84 of the ICAO Convention. In the past, whenever arbitration has been sought under this article, the two warring parties have settled the matter out of court. About a decade ago, the EU had started arbitration proceedings against the US under Article 84 and the matter was settled out of court in the EU's favour.
Impact on developing nations
The basic concern that seems to be driving this spate of protests and retaliatory measures is the thinking that if countries do not protest against this law, it will have a huge impact on developing economies.
This situation becomes more serious if one considers indications that the EU is also planning to impose a bunkering tax on ships using European waters, a move that could have a devastating effect on economies such as India, which depend on movement of goods by ships to a large extent.
The current situation, however, is more complicated. According to some experts, this new law is nothing more than a covert method of raising money to fund Europe.
Some others maintain that this move is driven by personalities in the EU and not by a particular nation. However, since this has become law, individual nations within the EU are helpless in preventing its implementation.
India's young fleet
Then there is also the thinking that the EU seems to be adopting a “high and mighty” attitude and is refusing to talk to the global community or listen to the other point of view. On its part, the EU has expressed “surprise” at the reaction from across the world, and particularly at the leadership role that India has taken in garnering global support against the EU-ETS.
According to the EU's thinking, India should not be leading the protest, as on the whole, it has a relatively young fleet and so its level of pollution is below the world average and below the average of those flying to and from Europe. Also, changing the law is not a possibility right now as it would involve a very complex legislative process for which there is no support in Europe.
There are others who maintain that it is going to be a lost battle for countries fighting the EU as there are only two major aircraft manufacturers in the world — Airbus in Europe and Boeing in the US — so airlines will have to approach both of them to meet their fleet requirements. The only option is going in for more efficient aircraft that lead to less pollution.
Ray of hope
However, the first ray of hope in this complicated scenario comes from the possibility of exploring a space in the legislation regarding exemptions for equivalent measures. According to the EU, the ETS is not a tax, it is an emissions ceiling, and is one part of its comprehensive approach towards reducing the impact that aircraft have on the environment.
Further, including aviation in EU-ETS allows aircraft operators to choose whether to reduce their emissions now or in the future. If they choose to reduce them at a later date, they can buy allowances from within the trading system from other aircraft operators, entities in the Emissions Trading System, or use some credits from the Kyoto mechanisms to cover their emissions — this means that emission reductions will take place somewhere and thus help the environment.
The EU also maintains that though including aviation in the EU-ETS will not directly affect the pricing of tickets, aircraft operators will have to spend more — they may have to invest in more efficient planes or buy emission allowances in the market.
Now all eyes are on the two-day global conference Moscow is hosting during February 21-22 for it is here that some clear picture will emerge as to whether Europe will blink first or the global community will have to take the war to another level.