COLUMN-Airline dispute exposes U.S., China climate inaction-Gerard Wynn

Thu Nov 3, 2011 11:07am EDT

(Gerard Wynn is a Reuters market analyst. The views expressed are his own.)

By Gerard Wynn

LONDON Nov 3 (Reuters) - A European Union plan to charge airlines for their carbon emissions has made unlikely allies of China and the United States in a trade dispute which underlines a failure in climate leadership by the world's top two emitters.

Their resistance could sap progress at a U.N. climate conference in Durban which starts later this month and may be a forerunner of similar disputes, for example over prospective EU environmental limits on fuels including Canadian crude from tar sands and Asian biofuels.

The EU from January next year will require all flights into and out of Europe to account for every tonne of carbon emissions, including those outside European airspace, and buy permits where these exceed a certain quota.

A majority of countries in the 36-member, U.N. International Civil Aviation Organization (ICAO) on Wednesday adopted a non-binding declaration urging the EU to refrain from the measure, which effectively includes flights from non-EU airlines in the bloc's emissions trading scheme.

Emerging economies argue that border measures lump them with richer countries, forcing them to take equivalent climate action and so contradicting a 1992 U.N. Climate Convention which puts the onus of carbon emissions cuts on developed countries.

Both U.S. and developing country opposition to the EU airline plan has focused on a preference for multilateral action, among other, legal objections for example that the plan counts as tax on jet fuel.

The positions seems inconsistent.

Clearly it's optimistic to expect Europe both to take world-leading climate action and only regulate consumption of products made inside its own borders, exempting imports and hurting its own industry.

And by exercising balancing border adjustments the bloc is applying measures similar to those included in a draft U.S. climate bill, which ultimately failed to pass the Senate last year, but which did pass a House of Representatives which voted last week to ban U.S. airline compliance with the EU plan.

GLOBAL ACTION

The opposition drives home how a rather small trade measure - the EU estimates it will add $1-9 each way to the cost of a long-haul ticket - can leverage a lot of politics.

And there's more to come: the EU's executive Commission is also working up plans to limit the use of more carbon-emitting fuels, threatening biofuel imports from Malaysia and Indonesia and oil extracted from tar sands in Canada, under its Fuels Quality Directive.

Imposing border tariffs, adjustments and other limits inevitably raises tensions.

Perhaps for that reason, the EU has so far chosen to shield its domestic steel and cement industries from its emissions trading scheme, giving them free carbon permits rather than penalise local production and take equivalent steps against imports.

Evidence of a global political backlash to its aviation plan is now abundant.

Apart from Wednesday's ICAO declaration, U.S. airlines have sued the bloc at the European Court of Justice.

And India has tabled an agenda item on "unilateral trade measures" to be discussed at a Durban climate conference which starts later this month.

The move may illustrate a new hardline Indian stance since the departure of former environment minister Jairam Ramesh, who took a committed position on applying green concerns.

The agenda item will mobilise opposition to the EU aviation scheme and likely garner support from holdout countries such as oil exporter Saudi Arabia.

It could also entrench a circular stalemate at multilateral talks where progress would make unilateral action such as that of the EU less necessary.

The Durban meeting will fail in the main aim of the UN talks, to agree a broad, new climate deal to succeed the Kyoto Protocol whose present round expires in 2012, largely because domestic politics at present will stop the United States from ratifying a deal.

But there is much to play for, both on a face-saving commitment to reach agreement in 2015 or so, and in the meantime to mobilise aid for countries most vulnerable to temperature and sea level rises. (Editing by Jason Neely)

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