Extending the EU emissions trading scheme to air freight could increase chemical producers costs

Dearer skies ahead

30 July 2007 00:00  [Source: ICB]

The EU wants to improve the energy efficiency of air transport, but one downside could be escalating air freight costs

SEAN MILMO/LONDON

CLEANER SKIES are being forecast for Europe, even though a proposal to tax kerosene - a major component in aviation fuel - appears to have been scrapped.

Moves by the EU to bring aviation within its emissions trading scheme (ETS) are enjoying broader support, and chemical producers using air transport to deliver high-value products could see their freight costs rise.

West Europe has, by far, the world's largest air freight market, accounting for 52% of outgoing air freight traffic worldwide in 2005, and 46.5% of incoming cargo. Asia has the second-largest air freight sector, with a 30% share of traffic by origin and a 26% share by destination. North America's share was relatively small at 7% and 12%, respectively.

A kerosene tax was proposed two years ago by France and Germany. The Green Party, then a member of a coalition government in Germany, complained that the lack of a kerosene tax gave aviation an unfair advantage over other means of transport.

The tax, however, never got off the ground. Besides being heavily criticized by the air transport industry, it was also opposed by the UK, while hostility from the US ensured it would not receive sufficient international backing.

The ETS, which currently covers emissions of carbon dioxide (CO2) among global warming gases, is considered a more effective means of improving the energy efficiency of air transport.

Last month, the Council of Ministers, representing the governments of the EU's 27 member states, decided that aviation should be included in the ETS. But it also accepted demands by the air transport industry that other forms of transport should possibly be brought within the ETS as well.

A GLOBAL INDUSTRY

The EU executive - an advisory group of experts to the European Commission -urges in a report this month on future aviation regulations that not only should the sector be brought within the ETS, but that the Commission should work with non-EU countries to extend it beyond Europe.

"In a global industry like aviation, a global approach is clearly the best way forward," says the High Level Group for the Future European Aviation Regulatory Framework.

The report made no mention of fuel taxes, but it did refer to the possibility of the introduction of "environmental charges" as a means of improving the ­environmental performance of air transport. "The environment must be raised to the same level of importance as safety and efficiency in the aviation system," says the group.

It also calls for an acceleration of an upgrading of the EU's air traffic control systems through the amalgamation of 35 air navigation service providers into a single entity under what is called the Single European Sky (SES) project. A lack of efficient air traffic management causes congestion, delays and longer flight times.

The International Air Transport Association (IATA), the main global airline trade body, has warmly welcomed the High Level Group's report because it backs the association's position on emissions trading and the need for higher-quality traffic management.

"Each year, the failure to unite Europe's skies costs the economy €3.3bn ($4.5bn) in inefficiencies, and costs the environment 12m tonnes of unnecessary CO2 ­emissions," says Giovanni Bisignani, IATA's director general.

IATA has committed itself to preventing by 2050 a predicted 50% rise from 2% to 3% in air transport's contribution to global CO2 emissions because of the likely growth in air transport. But it stresses that ­aviation needs more than the help of emissions ­trading systems.

"Emission trading schemes only make sense with efficient infrastructure," says Bisignani. "Efficiency must be our common vision in limiting the 2% of CO2 emissions attributed to aviation. The UN Intergovernmental Panel on Climate Change (IPCC) estimates that there is a 12% inefficiency in air traffic management globally."

 

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