EU AVIATION AND ENVIRONMENT SUMMIT ON EMISSIONS TRADING

UNCLAS SECTION 01 OF 02 PARIS 002203 SENSITIVE NOT FOR INTERNET DISTRIBUTION SIPDIS E.O. 12958: N/A TAGS: EAIR KGHG SENV EIND ETRD FR SUBJECT: EU AVIATION AND ENVIRONMENT SUMMIT ON EMISSIONS TRADING SCHEME REF: Brussels 1629 ¶1. (SBU) Summary: At the November 17-19 EU Aviation Summit in Bordeaux the GOF gave no signs of backing off commitments to include aviation in ETS, but it provided no guidance on regulating international flights. Opponents of ETS including aviation called for greater reliance on ICAO for emissions reduction schemes, and urged the EU to work with the United States and developing countries to avoid a legal imbroglio. End summary. FRANCE WANTS AVIATION INCLUSION IN ETS ¶2. (SBU) At the November 17-19 EU Aviation and Environment Summit Junior Transport Minister Dominique Bussereau announced that France's priority is to convince ICAO members to support the EU-ETS. A global mechanism for limiting international air transport emissions must not negatively impact European aviation competitiveness or shake the industry's "fragile economic equilibrium". In closing remarks, Bussereau said if the Europeans join forces, they can overcome the economic, energy, and environmental challenges of the air transport sector without sacrificing profitability. NO ETS GLOBAL MECHANISM ¶3. (SBU) Several of the Summit's 250 participants from 25 countries raised the impending legal imbroglio for third-country carriers. IATA's Director General/CEO Giovanni Bisignani said Europe's unilateral ETS regional approach is ill-suited to solve what is a global emissions problem. In its current format, EU ETS amounts to a 3.5 billion euro annual tax designed to punish airlines without enhancing environmental performance. An effective global solution has to be fair and voluntary. Article 2 of the Kyoto protocol gives the responsibility for finding a solution to ICAO, not the European Commission, Bisignani concluded. ICAO IS TOO SLOW ¶4. (SBU) Georg Jarzembowski, member of the European People's Party (Christian Democrats),agreed there is hope ICAO will move the international process forward, but added "hope is the last thing you do before you die." European Commission DG for Energy and Transportation Ruete also criticized ICAO's slow pace. He insisted on negotiations for establishing a legal framework among the Commission and third-party countries that could include measures for reducing the climate impact of flights to EU airports, or recognizing ETS-equivalent systems which meet the requirements of the EU directive. Ruete reminded participants of the threat of carbon leakage for an industry facing global competition. Expressing serious doubt about the willingness of key partners, specifically the United States, China, and Japan, to implement their own ETS anytime soon, Jarzembowski pleaded for the Commission to start third-party country negotiations now to protect European airlines. ETS LEGISLATION ¶5. (SBU) Jarzembowski raised the immediate procedural issue of ETS legislation. The revised EU ETS is due to come into force in 2013 and will cover power intensive industries and aviation. Jarzembowski reminded the group that the European Parliament's Environment Committee had raised the percentage of emissions permits to be auctioned (as opposed to distributed freely) from a previous compromise of 15 percent to 20 percent, with the prospect of 100 percent auctioning by 2020. The French Presidency wanted to keep aviation out of the ETS general review (which would open aviation emissions to a level of auctioning consistent with other sectors) in favor of an aviation-specific review in 2014. Jarzembowski has introduced an amendment from the EP floor to this effect. TAX OR FLEET UPGRADE ¶6. (U) The Energy and Transport DG Ruete raised the issue of airlines being forced to modernize fleets to meet reduced CO2 targets. Recent members of the EU, and airlines using mid-size aircrafts, will endure an "unjustified burden" because of the proportionally larger investment required to revamp their fleets. It is unrealistic for the former, at this stage in their development, to comply with the EU ETS environmental standards within such a tight timeframe. ¶7. (U) An Aviation Environment Federation representative asserted the current 3-4 percent industry-wide emissions growth rate exceeds the current 1-2 percent technological efficiency gains in operations and engines. If technological efficiency does not increase, emissions reductions growth must at least drop by 1-2 percent for progress. Whether airlines face 100 percent auctioning or upgrading an ageing fleet, the costs will be significant and impose difficult business decisions at a time of economic downturn and financial PARIS 00002203 002 OF 002 crisis. Jarzembowski and Ruete suggested the crisis is a time to focus instead on viable measures related to the energy/climate package that will not sacrifice competitiveness; it is questionable if the revised ETS targets for aviation meet this criteria. ¶8. (SBU) Comment: The French presidency did not announce a plan at the Summit for dealing with the legal implications of including international flights in the EU ETS, nor did it articulate views on whether non-EU allowances will be eligible for free credits, or if equivalent cap-and-trade schemes will be accepted (reftel). Instead, GOF and EU representatives gave the impression their agenda was inevitable, and above discussion. Rather than address the implications of the economic slowdown for industry efforts at adopting more environmentally-friendly practices, they dismissed such concerns as a pretext for stalling the EU's climate efforts and reopening questions about the inclusion of aviation in ETS. Stapleton