I've posted before in these pages about how the business lobby, under pressure to respond to climate change, is starting to fracture. There was another dramatic example of this yesterday in Kuala Lumpur at the annual general meeting of the International Air Transport Association (IATA) when the CEO, Giovanni Bisignani, took an extraordinary swipe at the UK government and the banking industry.
In the run up to the Copenhagen climate talks IATA has belatedly offered up a pledge on behalf of its member airlines to pay to offset growth in aviation greenhouse gas emissions to 2020. But in return, Bisignami is calling for a normalization of existing environmental tax regimes so the industry only pays once. The UK Air Passenger Duty (APD) is a particularly sore point, its been around for years and was set up by the UK government to collect funds to nominally compensate for the environmental costs of aviation. Unsurprisingly, the duties collected have long been inhaled into the UK Treasury with little or no investment in infrastructure that might help improve industry performance, for example alternative fuels or improved air traffic control efficiency. Says Bisignami:
It is unacceptable that money collected from our responsible industry in the name of the environment is being used by an irresponsible government to pay inflated MP expense claims or bail out banks.
Ouch! In fairness important to note that HSBC, to my mind the banking sector leader leader on the issue of climate change, has refused bailout money from the government though it has taken a severe hit from the credit crisis.
What is really interesting about this pledge is the compensation for growth angle. If you look carefully through the IATA ranks you won't find among them the low cost carriers such as Ryan Air, Easyjet or Southwest. Obviously these carriers, more recently characterized by a high growth curve, will carry more pain than full service airlines who have already established full scale.
I say the pledge comes from IATA belatedly because readers will know from my previous post, it was the pioneering work of London based NGO, The Climate Group, that forged a deal allowing the more progressive airlines to break away from industry associations such as IATA and the Air Transport Association (ATA) which been until now in stalemate with the industry negotiating body, ICAO. The Climate Group has convened a group of airlines, the Aviation Global Deal (AGD),ready to step aside from their industry affiliations and recommend a deal directly to the UN climate negotiators.
Back in April The Climate Group launched AGD together with Air France KLM, British Airways, Virgin Atlantic & Cathay Pacific. In contrast to the IATA position, AGD called on the UN to place a cap on global aviation emissions but to do so globally and so set a level playing field. Aviation will be brought under the terms of the EU emissions trading scheme from 2012 so admittedly European carriers do have something of an additional motivation to see a global deal. Since its launch Finn Air, Qatar and Virgin Blue have also joined the The Climate Group/AGD neogotiating platform.
Today the AGD group goes before the UN Climate change negotiators in Bonn to provide more detail on their previously announced commitment. They will propose a range of three scenarios that represent a wider and perhaps more balanced offering than IATA is currently putting on the table:
The AGD Group has considered a ‘carbon neutral growth’ target, a 5% reduction and a 20% reduction in emissions through to 2020, using a 2005 base-year and estimated future carbon prices. ......... Under all scenarios, the airlines would be active participants in international carbon markets in order meet their emission targets most cost effectively. Based on the scenarios assessed, auction revenues of up to USD$5 billion per annum could be generated to support activities such as climate adaptation programmes and initiatives to combat tropical deforestation, a major source of greenhouse gas emissions. AGD members highlighted the critical role these auction revenues could play in delivering a fair and equitable deal in Copenhagen.
Richard Branson, Virgin Group supremo spelled out the dilemma for carriers such as Virgin Atlantic & Virgin Blue who want to see the industry reduce its impact but don't fancy ending up as road kill in the process:
We are looking at every single way of tackling climate change. All airline companies must support their governments in making sure we get a treaty to reduce carbon output dramatically. .... There is a price to pay and, as long as other airlines pay, we are happy to pay it.'
There will be many more high profile and dramatic skirmishes both within and cross industrial sectors in the run up to a climate deal this December in Copenhagen. Most industries have long ago abandoned the obfuscation of debating the science of climate change and have moved now to adapting their business model to the new reality and to ensure their businesses achieve the best strategic positioning. But in order to create confidence in an effective global trading system to make all this work there are a few serious considerations. We need market based instruments such as cap & trade to function well across the global economy and funds raised should be fairly managed and invested in new technologies and in the protection of forest carbon sink assets. To make this system stick a robust system of measurement, reporting and verification across the board becomes the real linchpin.
To quote the UN Framework Convention on Climate Change working group paper from March this year:
Ambitious mitigation actions by all Parties, in accordance with their respective responsibilities and capabilities, and ambitious financial and technological support for actions by developing countries will be at the core of an agreed outcome that enables the full, effective and sustained implementation of the Convention. Robust measurement, reporting and verification of both actions and support will contribute to building confidence among Parties and thus to their willingness to scale up their level of ambition. The level of global ambition to mitigate climate change will, in its turn, determine the scale of the adaptation challenge and the need for finance and technology to cope with that challenge. The negotiations under the Bali Action Plan must focus on achieving political clarity on these core points as a basis for action by COP 15.