Monday, September 15, 2008

Emerging Airline integration Issue

A bit of old but important news that has yet to catch on:


The European Commission (of the European Union) decided upon an emissions trading scheme (ETS) to help curb greenhouse emissions--specifically carbon dioxide (C02) back in 2003.  Although this has been in effect for some time now, the EU is nearing a deadline for airlines to join the scheme as well. 


Simple version of how it works:


Countries are given a specific number of credits, each of which "allows" a large polluter such as factories or power-plants to emit a certain number of tons of CO2 into the atmosphere each year.


The countries are distributing these credits to their largest polluters.  Polluters going over the limit allowed by their credits are penalized severely.  Polluters that stay under the limit can "trade" the credits to the other polluters that are in danger of going over the limit thus creating a free-trade market for the credits. 


A more intricate explanation can be found here on Wikipedia. 


 Non-EU Airlines to be included in 2012:


The EU-ETS has not yet been applied to airlines but the scheme will apply to European Union airlines by 2011 and then to all other carriers touching down within EU member states by 2012, including American-based airlines. 


Obviously, adhering to the EU-ETS is extremely burdensome and costly for any airlines that are subjected to it.  Predictably, the U.S. Federal Aviation Administration (FAA) has spoken against the demand, asserting that the EU's insistence on including American Airlines in the ETS is a violation of international trade agreements.   


Why it matters:


For all you global integrators out there, this is a fantastic example of a fundamental global integration issue that we are seeing with our rapid increase of international business.  The EU is attempting to enforce a policy for a global problem based on the current (but fast becoming "old") system of land-based sovereignty.


Near-Future Implications:


This has already raised a huge concern with American airlines that are balking at the enormous added burden and cost of conforming to the EU-ETS. 


I anticipate that this is going to become a huge issue that will entail an entire new industry emerging to address it.  The industry will break into sub-categories:


1.  A renewed engineering vigor for producing aircrafts with lower CO2 emissions.

2. A brand new legal field devoted to issues of applicability of EU Directives and law to business based outside the EU but having operations within the EU. 

3.  A field of specialists with legal, business and diplomatic elements springing up to help make this transition without any major strain on free-trade agreements. 


This is a huge example of the new conditions necessitating the new field of global integration to help settle these issues in an amicable and efficient manner.  This field is exciting and brand spanking new for anyone that wants to dive in.  I will definitely be posting more on this later.    


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