Progress on sector agreements at Durban: but trouble ahead for aviation in EU ETS

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Whilst the negotiations on an international agreement might be up in the air at the moment, there seems to be some progress in other forum.

The International Chamber of Shipping (ICS) has proposed international sector agreements for shipping. Recognising that shipping accounts for around 3% global emissions, there is a lot that can be done in reducing emissions in this sector. However, at the same time acknowledging that without a global sector agreement, there is a great risk of carbon leakage.

The ICS is calling on governments to recognise the benefits of such an approach in avoiding dangerous climate change and fully support the implementation of a shipping sector agreement.

EEF has long argued, and most recently in our position paper on Durban, that sector agreements for certain sectors is an equitable and fair way to reduce emissions at the global level. Taking the steel sector as an example, there would be great benefits to coming to such an agreement. As we heard yesterday when EEF gave evidence to the DECC Select Committee, when many of the variables in production are the same, this gives a level playing field. The issue for manufacturing in the UK and Europe however, is that these variables are skewed in part by the price increases caused by our climate change policies. This risks pushing production out of these regions to less environmentally regulated regions, thus doing nothing to abate emissions at the global level.

In the absence of an imminent deal on climate change post-Kyoto, global sector agreements for certain sectors starts to make a lot more sense; allowing regional circumstances to be more easily taken into account whilst certain regions continue to develop. It also has the potential draw wider participation from developed and developing nations and tackle emissions in more comparable way.

Indeed, taking the example of aviation, perhaps for some sectors, this is the only way to achieve reductions without a universal global commitment. Europe is still pursuing including aviation in the EU ETS, but this has come up against very strong opposition from around the world, with concerns about equity and trade barriers. Imposing regulations on countries outside of Europe are effectively poorly disguised trade barriers and as America argues against international law. As Kuni Shimada, special adviser to the Japanese Environment Minister Goshi Hosono rightly put it:

“Domestic law shouldn't be applied to somebody who is not subscribing to that law. It's ok for the 27 EU members to comply with it, but not for us, because we didn't decide it.”

This issue also raises issues about driving activity outside of Europe as it continues to plough blindly with a policy that no one else is following and is increasingly leaving the EU isolated.

Tensions are running so high in this sector that a Chinese airline is filing a law suit against the EU by the end of this year. Perhaps it is time for Europe to look beyond their beloved cap and trade?


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