Nobel Prize winners urge Obama to back carbon pricing

Thu Mar 14, 2013 1:54pm EDT

* High-level group meets March 25-27 in Montreal

* Progress so far has been slow

* European Union has given ICAO a year to get a global deal

By Barbara Lewis

BRUSSELS, March 14 (Reuters) - A group of leading economists, including eight Nobel Prize winners, has written to U.S. President Barack Obama urging him to support a carbon price on aviation.

An EU law requiring all aircraft using EU airports to pay for emissions via the bloc's Emissions Trading Scheme (ETS) last year stirred international outcry and threats of a trade war.

Eventually, the Commission, the EU executive, announced it would freeze its law for a year, to spur agreement of a less contentious global alternative at U.N. body the International Civil Aviation Organization (ICAO).

In the letter, dated March 14, the eight Nobel Prize winners and 24 other economists call on Obama to back a market-based measure, like the EU scheme, as the cost-effective way to encourage technological change and lower emissions.

"While we recognise the barriers to a uniform global price on all carbon emissions, pricing emissions in the aviation sector via ICAO would be a good start," the letter said.

"Absent such an agreement in ICAO this year, U.S. airlines will face a growing patchwork of international regulations and compliance costs, while aviation emissions will continue to rise and contribute to dangerous climate change."

Some of the same economists wrote to Obama a year ago, asking him to drop his opposition to the EU plan.

Instead, he signed the EU ETS Prohibition Act to shield U.S. airlines from complying with the EU law.

The U.S. law also gave the U.S. government the authority to steer talks on a global solution to aviation emissions.

HIGH-LEVEL GROUP

A high-level group, including a U.S. delegation, meets again in Montreal on March 25-27 as part of ICAO efforts to get closer to a deal.

So far progress has been slow, as the industry has campaigned for greater efficiencies, rather than market-based measures. A U.S. position paper, seen by Reuters, put forward the idea of an airspace approach that would leave the bulk of emissions unaccounted for.

Earlier this week, the European Union agreed the text to enshrine in law the suspension of its requirements on intercontinental flights until the ICAO assembly in September and October this year. Internal EU flights are not exempt.

The assembly is only held every three years, so if a deal is not agreed then, the risk is there will be many more years without a global solution to aviation emissions. The European Union says it will automatically reinstate its law in the absence of agreement.

The letter, which is also signed by Robert Litterman, former head of risk management at Goldman Sachs, and a board member of conservation group WWF, is published on the WWF website.

The Nobel Prize-winning signatories are Kenneth Arrow, William Sharpe and Al Roth, all of Stanford University, Eric Maskin of Harvard University, Thomas Sargent, New York University, Robert Myerson of the University of Chicago, Christopher Sims of Princeton and Joseph Stiglitz of Columbia University.

EU Climate Commissioner Connie Hedegaard in a Twitter message said she hoped Obama would take the Nobel Prize winners' advice. "Nobel Prize winners are normally wise persons," she said.

No-one from the U.S. State Department was immediately available for comment.

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