EU AVIATION AND ENVIRONMENT SUMMIT ON EMISSIONS TRADING

UNCLAS SECTION 01 OF 02 PARIS 002203

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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

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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