EU’s emissions trading scheme (ETS), launched by the EU in 2005 to combat climate change, was the world's first cap-and-trade program for carbon. The scheme originally applied to power plants and factories based in the EU, but in 2008 EU justice ministers approved a compromise deal to include aviation within the ETS beginning January 1, 2012. As of January 1, carriers that fly to or from Europe must purchase permits that allow them to emit a set amount of carbon dioxide. If a carrier emits less than the preset cap, it can sell its remaining permits, but if it exceeds the cap, it must buy more credits. The cap is set at 97 percent of the average aviation emissions between 2004 and 2006, but between 2013 and 2020 it will shrink to 95 percent of average emissions. To soften the economic impact, EU officials announced in September 2011 that carriers would be allowed to emit 85 percent of their carbon dioxide limits free of charge for the first year. Airlines won't receive their first "carbon bills" until March 2013.
The cap-and-trade scheme, which has angered the US and Chinese governments and airlines worldwide, came into force on Sunday after the European Union's highest court rejected a challenge brought by US carriers last month.
China Air Transport Association estimates that the scheme would cost Chinese airlines about $127 million in the first year and more than triple that by 2020. China's airlines will refuse to pay any charges under the ETS and are considering taking legal action against the EU.
What would happen to the airlines refuse to comply? Would the Europeans deny those airlines' rights to land in the 27 nations of EU? That wouldn't not be a good idea, as it would hurt EU’s economy.
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