The first week of 2012 was a busy one for developments in the European Union's law requiring airlines to cut their global warming pollution.
On Jan. 1, Europe’s “Aviation Directive” took effect. The law holds all flights using EU airports accountable for their pollution and requires the airlines to make modest cuts in their carbon emissions. (Remember that last month, after Secretary of State Hillary Rodham Clinton and Secretary of Transportation Ray LaHood sent a letter to the European Commission saying the U.S. might retaliate against the law, the EU's highest court upheld the law against a challenge by United-Continental and American Airlines and their trade association.)
Obama administration weighs its options
Last week some officials from the Obama administration alluded to retaliatory measures but declined to give specifics on what the U.S. will do next. These unnamed U.S. officials told Reuters, in a Jan. 6 story:
We are contemplating a wide range of possible steps that we could take … we haven’t decided how to move forward on any specific one.
Maybe these officials’ vagueness is because the administration is currently gathering data from U.S. and European airlines to determine whether EU law discriminates against US airlines. But maybe they are starting to realize that the legal case for retaliation is thinner than the snow that didn't blanket most of the US at Christmas.
Despite what Chinese airlines say, the EU law is an emissions cap, not a “tax”
Too bad the Chinese airlines' trade association doesn’t understand the EU law, inaccurately referring to it in a Reuters interview as a “tax,” and missing – to the detriment of its members' shareholders and customers – what the law really is: an opportunity to fly more efficiently and make money.
I want to make this point perfectly clear: the EU law is a cap on emissions, not a tax.
With a typical carbon tax, the more companies pollute, the more they pay. But under a cap-and-trade system like the EU’s that puts limits on pollution, airlines that cut emissions can comply without paying a nickel. In fact, companies that come up with better, deeper, faster ways of cutting pollution can actually make money. The EU’s top court recognizes that airlines participating in the EU law could “even make a profit” by cutting pollution and selling their surplus emissions allowances. (See paragraphs 136-145, especially 142, of the Court’s decision.)
China's foreign ministry was reportedly more nuanced in its comments about the EU law than the airline trade association. It didn't threaten non-compliance and it didn't threaten retaliation. Instead a foreign ministry spokesperson told reporters:
We hope the EU can take careful precautions with a cautious and practical attitude, and regarding those aspects involving China, appropriately discuss and handle this matter.
Airlines are participating in EU law
Despite the discord, airlines have actually been preparing to comply with the EU law for months; they’ve all filed emissions data and applied for the law’s generous free allowances.
And with the start of 2012, the world’s smartest airlines are quietly lining up to participate, not litigate:
- Singapore Airlines, the world's second-most valuable airline, has said it will offset the impact of the EU system by improving fuel efficiency and reducing its carbon emissions, according to Reuters.
- Among US airlines, Delta, the No. 2 U.S. carrier, led the pack with a first-week-in-January fare increase of $3 per flight to Europe – one-twentieth the cost to customers of taking a second bag on their trip, BBC's Richard Black pointed out. United-Continental, U.S. Airways and American Airlines have since reportedly followed suit, matching the $3 increase.
- Ryanair, Europe’s largest budget airline, is introducing a charge of 25 euro cents – about $0.32 – per seat starting next week, Reuters reported.
While German-based Lufthansa – the world’s second largest long-haul carrier, according to Reuters – has announced it will address the EU law by passing on the costs to its customers, it hasn’t clarified how much or what the money would be used for. Green groups and consumer groups will be watching to see whether and how much they and others like Emirates and Hong Kong-based Cathay Pacific raise fares.
With his new focus on holding airlines to be more transparent about the fees and charges they add to fares, Secretary LaHood might want to make sure airlines tell customers how they use environmental surcharges – with airlines ideally limiting the fare increase to the modest true cost of complying with the EU law. That would be a win for the flying public and the environment.