Ask Leo: what's wrong with the Emissions Trading Scheme?

The EU has finally agreed to include aviation emissions in the European Emissions Trading Scheme (ETS). This might look like good news - after all, it is the first and only international emissions agreement to include air transport, and indeed the only policy measure the British government has on the table to address aviation's role in causing climate change. But don't get too excited just yet - because this measure is not actually intended to reduce aviation emissions.

Instead, it is expressly intended to allow them to continue to rise, by enabling airlines to purchase credits under the scheme from other sectors who have successfully reduced their own emissions, or worse, from 'accredited' offsetting schemes in far-off lands such as China. But the extra warming impact of aviation emissions over ground-based CO2 emissions is unaccounted for in the plan. Which means that permits to pollute that are sold to airlines by, for instance, power companies, will actually lead to 2 to 5 times more global warming than if the power companies had never reduced their emissions in the first place. MEPs had proposed a way to factor this in to the scheme, but, somewhat unsurprisingly, the aviation lobby successfully got that thrown out by the Commission.

Airlines also got what they wanted with the way emissions permits will be allocated. Their worry was that they might be made to actually pay for the rights to emit greenhouse gases, which would have been awfully expensive and potentially put some low cost carriers out of business. But following a bit of palm-greasing here and a spot of arm-twisting there, lo and behold they've been told they'll only have to pay for 15% of their emissions permits at auction, with the remaining 85% handed to them for free. Perversely, this is very likely to lead to airlines actually making 'windfall' profits from their inclusion in the ETS, as they follow the example of power companies in the first round of trading, and pass on the market price of the permits to customers despite having been given these permits for nothing.

Nobody seems able to explain why aviation will not be included in the scheme until way over in 2012 - ten years after the other high-emitting sectors, and at least two years after it would be practicable. Similarly, the aviation sector will get far more free permits than any other sector - the equivalent of nearly double their 1990 emissions levels, while other sectors have to actually reduce emissions by 8% on 1990 levels. A report commissioned by the aviation industry itself show that its inclusion in the ETS is, at the very most, likely to lead to an 83% rise in emissions by 2020 - compared with an 86% rise in a 'business-as-usual' situation. And finally, again for reasons nobody can explain, good old private jets will be exempt from the scheme.

No wonder most European airlines are so cheerfully upbeat about this development; it's going to make them more money whilst facilitating a near-doubling in the size of their market over the next ten years or so. If this is supposed to be helping prevent climate change then please, EU - stop helping.