Market News

 June 21, 2011
Airlines urge Russia to oppose Europe's carbon trading plans

 Russia could join China and the US in speaking out against aviation emissions being included in EU's cap and trade system

A global aviation trade body has encouraged Russia to become "more vocal" in its opposition to EU plans that would bring the sector into its emissions trading scheme.

The International Air Transport Association (IATA) warned earlier this month that the proposal to charge operators for each tonne of CO2 emitted during every flight in and out of Europe from 2012 would lead to trade wars with the world's most powerful countries.

European airlines would prefer a global solution agreed through the International Civil Aviation Organisation (ICAO), as they fear losing jobs and trade to less regulated countries. The US launched a lawsuit claiming the plans are in contravention of international agreements soon after they were announced in 2008, while the China Air Transport Association (CATA) has also threatened legal action.

After a visit to Russia, Giovanni Bisignani, IATA's director general and chief executive, said in a statement that the country, which has been a strong advocate of a global deal, should add its voice to those opposing the EU's strategy.

"Europe's plan could not be more wrong," Bisignani said. "I encourage Russia to join the growing chorus of countries -- including China and the US -- which have made their opposition very well known. Europe needs to understand that imposing the emissions trading scheme [EU ETS] on sovereign states like Russia, China and the US could lead to consequences, not just for its airlines, but for the weak European economy."

The EU has repeatedly said it will not back down in the face of threats from other countries and aviation will be included in its $120bn cap and trade system from next year.

Airlines will become the second-biggest sector in the EU ETS after power generators, and will receive 82 per cent of the 212,892,052 credits available next year for free, with 15 per cent auctioned and three per cent reserved for new entrants.

Carriers that exceed their carbon quotas will have to purchase permits from other businesses that emit less, although the EU has said exemptions will be granted if governments take "equivalent measures" to tackle aviation emissions.