December 2, 2011

In a November 17, 2011, report to investors, Swiss bank UBS tallied the cost for European Union states to implement a proposed Emissions Trading Scheme (EU-ETS) at $280 billion, while producing “almost zero impact” on decreasing carbon emissions.

The UBS report, which was the focus of a recent story in The Australian newspaper, concludes EU officials could have spent that same money on directly reducing emissions from European power plants by 43-percent. That flies in the face of longstanding EU claims that ETS is by far the least expensive way to cut greenhouse gases in accordance with its obligations under the Kyoto Treaty (which the U.S. failed to ratify).

The UBS report describes EU-ETS as having “limited benefits and embarrassing consequences,” according to The Australian. The Swiss banking firm’s report cited falling prices for carbon permits and predicted a crash in permit pricing. Ahead of that, UBS suggested most investors would stay away from the carbon trading market until perhaps sometime in the next decade.

On the heels of the UBS report to investors, Deutsche Bank issued a strong warning last week that prices for EU Carbon Allowances (EUAs) would drop precipitously. Earlier this year, the German bank’s analysts predicted a shortage of 395 million EUAs by 2020. Now, Deutsche Bank predicts a surplus of 566 million. “Under current EU-ETS legislation and targets,” the report said, “we do not think that there will be a deficit at anytime beyond 2020 either.”

Worldwide opposition to EU-ETS has grown over the past month. As NBAA reported in November, The International Civil Aviation Organization (ICAO) has adopted a white paper from 26 nations, including the U.S. and Canada, urging the EU to omit air operators not flagged in member states from required ETS compliance. Chinese officials indicated their airlines would sue the EU over implementation.

Mideast carriers openly urged the EU to abandon implementation of ETS altogether. At a summit with EU leaders in Washington, President Obama expressed his concern over the January 1 implementation of EU-ETS, and its possible impact on US-EU trade, although he did not specifically mention the measure passed by the House earlier this year prohibiting U.S. operators from taking part in EU-ETS.

Business aviation groups from around the world, including NBAA and the International Business Aviation Council (IBAC), have repeatedly opposed EU-ETS, in part because Global aviation standards are overseen by the International Civil Aviation Organization, and any new standards should be decided by ICAO.