(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON, Nov 7 (Reuters) - Some limited flexibility over how member states apply a European Union airlines emissions law might buy time to resolve opposition while the U.N.’s International Civil Aviation Organisation (ICAO) tries to forge a compromise deal.
The emissions trading directive requires operators of aircraft arriving in or departing Europe to surrender permits equal to their whole-flight emissions.
Newly re-elected U.S. President Barack Obama will probably sign a bill opposing the EU scheme which the Senate unanimously approved in September after a similar bill passed the House of Representatives.
The Senate bill gives the U.S. Secretary of Transportation power to prevent airlines from complying with the EU law.
China and India have already told their national airlines not to comply.
The climate arm of the European Commission is in a difficult position: it is facing pressure both from European airline industry and internationally to find a compromise.
But to soften the law’s impact on airlines would invite speculative litigation from other energy-intensive industries which have repeatedly tried to unravel the scheme and notably steel.
European member states have authority over implementing the EU law and have some leeway in imposing fines and ratcheting penalties which could buy some very limited time as countries try and forge an unlikely compromise, through a global deal on aviation emissions, at a major ICAO meeting next year.
Until now there has been high compliance in the EU emissions trading scheme (ETS): last year, fewer than 1 percent of factories and power plants failed to surrender allowances to cover their 2011 emissions, according to the European Commission.
However, that is about to change as airlines join the scheme and some non-EU countries baulk at the idea of paying for emissions outside European airspace.
Chinese and Indian carriers have already missed an interim deadline to submit emissions data.
The first major deadline falls next April when operators must surrender enough carbon permits called EU allowances (EUAs) to account for their 2012 emissions from European flights.
It is the responsibility of EU member states to force operators to comply or to impose penalties.
As the EU law (the emissions trading directive) states, in Article 16:
“Member States shall ensure that any operator or aircraft operator who does not surrender sufficient allowances by 30 April of each year to cover its emissions during the preceding year shall be held liable for the payment of an excess emissions penalty.”
That leaves no doubt that member states which fail to punish non-compliance will be in breach of EU law.
However, the directive does allow some discretion in other areas, opening the door - just a crack - to a delay while countries seek bi-lateral or global deals.
First, the directive states that the penalty is 100 euros ($130) for every tonne of CO2 emitted without a corresponding permit, but does not say when the penalty should be paid.
Regarding timing, it is only explicit that operators must add the missing allowances to their following year’s emissions, in a cumulative process which a determined transgressor might be content to continue indefinitely.
It seems likely that member states will require penalties to be paid in three to six months, but such timing could slip.
Second, the Commission leaves it to the member state to determine how hard to chase the operator for non-payment.
The directive’s ultimate sanction is to ground the offender’s European flights.
But it is up to the member state to seek that.
“In the event that an aircraft operator fails to comply with the requirements of this Directive and where other enforcement measures have failed to ensure compliance, its administering Member State may request the Commission to decide on the imposition of an operating ban on the aircraft operator concerned,” the directive says.
Each operator is assigned to a Member State according to where the airline is based or operates from most.
Commission data show that Britain and France will administer by far the most operators, making their approach most relevant.
The watchdog in Britain is the Environment Agency which leaves no doubt that it will pursue offenders, but makes no mention of timing or of higher sanctions.
“The penalty is mandatory and is set in the EU ETS Directive, which has been implemented in every Member State in the European Union. There is therefore no discretion whatsoever given to the regulator as to whether or not to impose the penalty,” it says in its “Guidance to Operators on the application of Civil Penalties”.
“Civil penalties will be imposed ... even if the failure to surrender sufficient allowances has arisen because of an inadvertent error by the operator or a mistake by the verifier over which the operator had no control or influence.”
Opportunities for discretion on timing and escalation are minor and only delay the moment when the EU would have to choose either to pursue penalties or write these off, requiring a change in the directive which member states have shown no appetite for.
The most optimistic scenario is that a ticking clock against penalties focuses diplomacy from next April towards bilateral deals or else a global, U.N.-brokered compromise at a congress in November next year, after 15 years of ICAO inaction.
But the alternative is even more improbable - a tit-for-tat impounding of planes at major airports around the world. ($1 = 0.7812 euros) (Editing by James Jukwey)