A global ‘cap and trade' scheme is the best way for the world's aviation industry to meet its climate obligations, a new CBI report says today (Monday).
The business group also voiced concerns about potential proposals for a domestic ‘per plane' duty to replace Air Passenger Duty (APD).
The UK aviation industry has already agreed emissions should not exceed 2005 levels by 2050, and from 2012 the industry will be subject to a European cap on emissions under the EU Emissions Trading Scheme.
The CBI report, called Green skies ahead, creating a low-carbon aviation industry, argues that a cap and trade scheme would control future levels of CO2 in a cost-effective way and, by being global, would not allow damaging ‘leakages' to other countries of either carbon emissions or economic activity.
Under such a scheme, an overall cap on aviation emissions would be agreed. Airlines would be allocated permits to cover their emissions, and if they exceed their permitted level of emissions they would have to purchase surplus permits from companies that have made extra progress in reducing their emissions.
The governing body for civil aviation, the International Civil Aviation Organisation (ICAO) will host its tri-annual general assembly in September, where it will reflect on the Copenhagen agreement and prepare for the next UN Climate Change Conference at Cancun in 2010.
The CBI is calling on the member governments that constitute ICAO to start laying the groundwork for an international cap and trade scheme to be established.
John Cridland, CBI deputy director-general, said: "Aviation is an economic enabler like no other industry. Britain can only be truly open for business when it has access to foreign markets to exploit investment opportunities and trade goods and services. The recent disruption caused by volcanic ash demonstrated just how much aviation underpins our modern economic life.
"While aviation emissions still only make up a small percentage of total UK emissions, strong future demand for flights means they are expected to rise. Growth in the aviation industry will need to be sustainable for the UK to meet its longer-term aim of an 80% cut in overall emissions by 2050.
"The best way for the world's aviation industry to meet its climate obligations is through a global cap and trade scheme. Such a scheme would include all airlines, removing scope for leakage of emissions from one country to another, and would run with, not against, the grain of this international industry.
"The coalition Government should be wary of introducing a domestic ‘per plane' duty to replace Air Passenger Duty. It would be ineffective, damage competitiveness, and would distract from the important goal of establishing a global cap and trade scheme."
The CBI supports the inclusion of aviation in the EU's Emissions Trading Scheme (ETS) from 2012. This is an important step in the right direction, it says, but will remain an imperfect mechanism for regulating aviation emissions until a global cap and trade scheme is established.
Since 1994, APD has been levied on all passengers whose journey originates at a UK airport. In 2009/10 the duty raised £1.9bn for the Government.
The previous Labour government developed proposals to replace APD with ‘Aviation Duty', a per-plane duty that would be levied on each plane departing the UK according to its weight and the distance it was scheduled to fly. However, in 2008 it dropped these proposals, referencing the likely harm it would cause to UK connectivity and employment in the air freight industry.
The new coalition Government has pledged to introduce a ‘per plane duty' and will consult on the issue. The CBI would oppose such a move if it is be structured on a similar basis to Aviation Duty, as it would deliver little or no environmental benefit, while undermining valuable long-haul passenger and freight services from the UK.