WHILE Europe’s leaders battle for the euro, another signature creation of the European Union (EU), one of the world’s most ambitious climate change policies, is also under attack. That is largely to its credit. Unlike most governments, the Europeans are actually trying to cut emissions of greenhouse gases and, in a globalised economy, this is starting to test trade rules and inconvenience others.
There are two main battlefields. The first, on land, concerns a proposed European effort to discourage more-than-usually polluting sources of transport fuel, known as the Fuel Quality Directive. It would do so by categorising sources of transport fuel according to their carbon intensity (a measure of the emissions involved in producing them) and penalising the most polluting. This has enraged Canada, whose production of oil from tar sands, a sludgy naturally-occurring bitumen which it has in abundance (for instance north of Fort McMurray, Alberta, pictured), would be a notable victim. Ahead of the first major EU vote on the proposed scheme, by a congregation of European officials on February 23rd, Canada threatened that, if it were passed, it would lodge a complaint with the World Trade Organisation.
The officials ducked the issue, with 89 voting for, 128 against, and 128 abstaining, including those from Britain, France and Germany. It will now be decided at a meeting of European ministers, probably in March. With Britain and France against the regulation—the former allegedly out of solidarity with an old ally, the latter apparently because Total, a French oil company, is heavily invested in tars sands—the lobbying, for and against, will be fierce.
The second conflict is in the air, and concerns a European law to bring airlines into the EU’s cap-and-trade project, the Emissions Trading Scheme (ETS). This is a bigger fight; the law is also a done deal. As of January 1st local and foreign airlines must have ETS permits to cover the emissions from all their flights into and out of the EU. To soften the blow, they will initially have 85% of these for free. They will have to buy the remaining 15% at the end of the first accounting period, in April 2013.
A group of 26 countries, including Russia, America, India and China, are incensed, arguing that the law infringes their sovereignty. This is principally because it applies to the entirety of the targeted flights, including the portion outside EU airspace. In response the EU argues that this is consistent with aviation norms and would otherwise be hard to administer. On February 21st and 22nd representatives of most dissenters met in Moscow to plot possible retaliatory measures. Some have warned of the row escalating into a possible trade war. Even before the meeting, China had forbidden its airlines to comply with the scheme.
Despite a lot of strident rhetoric during the meeting, that remains the most concrete challenge to the EU law. The dissenters issued a declaration in Moscow which listed eight possible retaliatory steps, including imposing new taxes on European carriers and denying them new flying rights. Russia is also reported to be mulling passing a similar ban to the Chinese. But this was less than some of the dissenters had promised. And with America rumoured to be making its peace with the EU scheme, there is a chance the opposition may be cooling. If it does not, the parties will have until early next year, when the airlines are due to be billed, to work out a compromise.
Timely fillip or grand humiliation
It would be better still if the UN’s International Civil Aviation Organisation (ICAO) would institute a global scheme, to make airlines pay for their emissions, of its own. The EU’s action on airlines was spurred by its longstanding failure, despite many promises, to do so. Now, embarrassed by the EU’s forthrightness, ICAO is again promising to come up with something. If it does, the EU says it will happily absolve airlines of their duties under the ETS.
This is high-stakes stuff, not least because of the precedents the EU threatens to set. Canada does not sell much tar-sands oil to Europe; yet it is terrified of having it stigmatised as a dirty fuel. (For the same reason, tar sands lobbyists prefer to call it “oil sands”.) The airlines, previously free to pollute, are also most concerned by the precedent that losing their impunity has established. They face a more immediate cost, too; though it is probably not as big as they say. A group of American airlines, who lost a legal challenge to their inclusion in the ETS in the European Court of Justice last December, claimed it would cost them $3 billion by 2020.
That sounds like an exaggeration. Nor was it an argument for their exclusion. Unchecked, fast-rising aviation emissions—currently around 3% of the global total—will cause vast environmental damage for which someone, somewhere, will have to pay. The idea of the ETS is to avoid that prospect, by steering polluters to embrace clean technologies—as aviation biofuels, for example, may turn out to be.
For the EU, the stakes are also high: this is a delicate time for its climate policy. Its steersmen appear to have taken heart from the lead role they played in salvaging a slightly-better-than-expected deal from the UN’s climate summit in Durban last December (almost nothing having been expected). At the same time, a tanking carbon price has cast a pall over the ETS. Due to a combination of economic recession and overly-generous allocation of permits, it has been at less than €10 a tonne all year. That is less than half its record high and too low to paint investment strategies green. In an effort to correct this, on February 28th a committee of the European Parliament approved a proposal to constrict the supply of ETS permits associated with yet another new green rule, concerning energy efficiency. The parliament is now set to vote on the proposal.
Pushing through the fuel rule and holding the airlines to account would give both steersmen and market another fillip. On the other hand, being forced to cave in on the aviation issue, in particular, would be a grand humiliation, which the EU’s climate folk will fight hard to resist. Hence the enthusiasm Connie Hedegaard, the EU’s feisty Danish climate tsar, is showing for the scrap. In a message on Twitter, she asked: “Unfortunately, our question for Moscow meeting participants remains unanswered: what’s your concrete, constructive alternative?”
Source: The Economist