Carbon Plan May Weaken EU Airlines’ Position, Deutsche Bank Says

The European plan to impose carbon limits on aviation could undermine the competitiveness of the region’s airlines as they may not be able to shift to passengers all the related costs, Deutsche Bank Research said.
The EU, which wants to lead the battle against climate change, decided in 2008 to include flights to and from the region’s airports in its emission-trading system as of 2012 after airline discharges in Europe doubled over two decades. The plan is under fire from airlines and governments outside the bloc, who claim it breaches international law.
“Fundamentally, emissions trading is an appropriate instrument to limit and/or reduce carbon emissions in aviation,” Eric Heymann and Joachim Hartel, analysts at Deutsche Bank Research in Frankfurt, wrote in a report dated yesterday. “However, the international orientation of the sector means that if the EU goes it alone on this issue the result will be competitive distortions to the detriment of European carriers.”
Carriers including American Airlines Inc. and United Continental Inc. are already challenging the law in an EU court, and China’s airline association said earlier this year the European initiative may prompt trade conflict. The United Nations aviation body adopted last week a non-binding resolution at the urging of 26 nations, including India, Japan and Russia, calling for the exemption of non-EU airlines from the cap-and- trade program.
Not Giving Up
The EU is not planning to give up or amend its plans in face of international opposition, Climate Commissioner Connie Hedegaard told a committee hearing in the European Parliament today. Her vow follows a non-binding opinion by an adviser to the EU court handling the U.S. airlines lawsuit that the bloc’s emissions measure is compatible with international law.
10/11/11 Ewa Krukowska/Bloomberg

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Categories: Foreign Nov 2011