Posted on February 22, 2012 - by Venik

Russia fires first shot in EU aviation emissions trade war

Moscow meeting agrees package of measures to push EU to ‘cancel or postpone’ aviation emissions trading

Simmering tensions between the EU and the group of countries opposed to the bloc’s expansion of its emissions trading scheme (ETS) to include aviation increased further today, after officials signalled that the so-called “coalition of the unwilling” had agreed a package of retaliatory measures.

Speaking following a meeting in Moscow of the group of 26 countries opposed to the new EU carbon pricing mechanism, Russia’s deputy transport minister Valery Okulov told reporters diplomats had agreed a package of measures the countries could now use to undermine the scheme.

“Every state will choose the most effective and reliable measures which will help to cancel or postpone the implementation of the EU ETS,” he was quoted as saying by news agency Reuters.

He also confirmed the group would meet again in the summer in Saudi Arabia as it looks to increase pressure on the EU to delay or abandon its plans.

It remains unclear precisely what measures countries opposed to the ETS could adopt, although the Moscow Times newspaper yesterday quoted state carrier Aeroflot as saying the Kremlin is considering passing legislation that would make it illegal for Russian airlines to comply with the EU’s rules.

“The Russian government is now reviewing a bill prohibiting Russian airlines to participate in emission trading: it means considering a retaliatory approach,” the company said ahead of the Moscow talks.

China has similarly said it has banned its airlines from participating in the scheme, while the US Congress is also considering legislation that would have the same effect.

There are also reports that countries could suspend talks with the EU on new routes and landing rights, further hampering EU airlines.

Under the changes to the ETS, which came into effect at the start of this year, all flights in and out of the bloc must take part in the cap-and-trade scheme with airlines carrying emission allowances equivalent to their annual emissions. The vast majority of these allowances will be handed out for free, but firms will have to purchase some allowances, adding to their running costs and potentially leading to increased ticket prices.

The EU maintains that the scheme will incentivise airlines to operate more efficient fleets and encourage passengers to look at greener alternatives, such as rail and videoconferencing. Analysts have also argued that during the initial stages of the scheme carbon pricing will add only a couple of euros to ticket prices.

However, airlines and the countries opposed to the scheme have repeatedly argued that a regional scheme will lead to trade distortions and have called on the EU to drop the scheme in favour of long-running, but as yet unsuccessful talks, to agree an international carbon pricing mechanism.

It remains to be seen how the EU will respond to any retaliatory trade measures, although officials have repeatedly insisted that they will not water down the scheme, despite the escalating threat of a full-blown trade war.

Writing on Twitter in response to the meeting, EU Climate Change Commissioner Connie Hedegaard said: “Unfortunately, our question for Moscow meeting participants remains unanswered: what’s your concrete, constructive alternative?”

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