EU said to spare foreign flights from carbon curbs through 2020

The European Union will propose extending an exemption on foreign flights from its carbon market until 2020 after nations worldwide reached a historic deal last year to introduce a global system to curb the growth of emissions from airlines.

The European Commission, the EU’s regulatory arm, will probably present a draft law on Feb. 3 sparing carriers, ranging from Delta Air Lines Inc. to Air China Ltd., the need to pay for emissions from flights into and out of the region for an extra four years, according to an EU official with knowledge of the matter. The current exemption, which began in 2012, would expire this year unless renewed.

The plan aims to ensure the EU continues to combat aviation pollution at home before the the global measures take effect, while averting a conflict with trade partners from the U.S., to Russia and China, who say the European carbon-market legislation breaches international law. Europe, imposed the curbs on all flights into and out of the bloc five years ago before scaling back the rules to encourage the United Nations to reach a worldwide agreement.

In October, the UN’s aviation body agreed to create a global system requiring airlines to compensate for emissions growth after 2020 by funding environmental initiatives. Rather than forcing emission cuts, the deal allows carriers to increase pollution in exchange for buying credits that support projects including renewable energy development or forest preservation.

While the International Civil Aviation Organization’s plan is voluntary for countries during the first 2021-2026 phase, at least 65 nations have agreed to join during that phase, including the U.S., China and Europe. The Environmental Defense Fund estimated the accord’s impact will be equivalent to removing about 35 million cars from roads each year.

Emissions from aviation account for about 3 percent of Europe’s total greenhouse-gas discharges, according to the commission. By 2020, they are projected to be some 70 percent above 2005 levels, even with improved fuel efficiency.

The extension of the EU freeze on pollution from foreign flights, known as a stop-the-clock measure, will need to be approved by the governments of member states and the European Parliament to be enacted. Companies in the EU cap-and-trade emissions market are subject to a declining cap on their carbon-dioxide discharges and have to submit allowances by the end of April each year to cover emissions for the previous year. If they breach their cap, they need to buy more permits.

Unless EU policymakers endorse the commission’s proposal, airlines will need to submit next year allowances covering pollution on their flights into and out of Europe during 2017. Should the draft law enter into force, only intra-European routes will be covered by the emissions market in the 2017-2020 period. Carriers in the ETS are given free emission permits making up 85 percent of the industry cap and have to buy the remaining 15 percent at auctions.

The EU will yet have to decide about how to design its laws on aviation emissions for the post-2021 phase, said the EU official, who asked not to be identified, citing policy. The commission suggested last year the bloc’s Emissions Trading System rules for airlines could continue along the ICAO offsetting program.

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