Rhein on Energy and Climate

Accounting jointly for about six percent of global C02 emissions air lines and shipping companies constitute an increasing burden for the planet, as the volume of air and sea transport, of goods and passengers, keeps rising in the wake of globalisation.

Until now both sectors have escaped any climate regulation, due to complex international legislation, which makes it difficult to regulate what is essentially an international business, especially shipping The 1997 Kyoto Protocol has simply exempted both shipping and air traffic from any commitments.

But in the run-up to the Copenhagen Climate Conference, several governments, in particular the EU, have expressed their resolution to put an end to such exemption. The EU has announced unilateral action in the absence of a multilateral deal; and the international community has invited the airline and shipping associations to come up with proposals for curbing their emissions.

In order to pre-empt a globally coordinated government action, both industries have now launched, for the first time, ideas on how to cope with their rising emissions. Their proposals are similar: air transport and shipping should be subject to emission caps and trading, which would raise costs and thus constitute an incentive for raising fuel efficiency, using biofuels, making lighter airplanes, lowering the speed etc.

However, the scope for reducing C02 emissions in shipping or aviation appears very limited, barring a technological revolution; and whatever progress will depend essentially on the manufacturers of ships and aircraft.

It is therefore difficult to envisage an emission cap system which would impose substantially lower emissions, as in the case of power generations, where operators dispose of technical alternatives. Airline and shipping owners can do no more than “offset” their emissions by buying “credits” outside the industry; say through financing wind parks in China or preserving tropical forests in Indonesia.

To be effective, such schemes will require a strict global reporting and supervision mechanism. The international community cannot endorse a private cap & trade regime and leave it up to business associations to manage it in good faith on their responsibility.

The alternative to cap & trade schemes run by industries would be a taxes on kerosene and shipping fuel. Airlines and shipping companies would have to pay a levy on their fuel and kerosene consumption, minimising perception costs and the risk of tax evasion. On international transport, identical rates should apply in order to prevent competitive distortions. Taxes might be levied by an appropriate UN organism.

National governments should remain free to fix tax rates on domestic transport in line with their national climate action programmes.

The debate is launched. Given its complexity and the diversity of interests it will be impossible to adopt any decisions before the end of the year. At Copenhagen the international community should mandate two working groups, one for shipping and another for air transport to elaborate operational proposals by July 1st 2010 to enter into force in 2013 as part of the future international climate regime.

Whatever the regime – cap & trade or tax – adopted, its impact on global emissions from sea and air transport will be minimal. Nobody will dare to levy exorbitant taxes or strict emission caps, as international transport constitutes too vital an element in modern societies an as technological alternatives are not available.

The best hope is therefore for fossil energy prices to go up progressively and induce the industry to look for alternative technologies. But that perspective seems very far away.

Brussels, 27.09.09 Eberhard Rhein

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