Australia: Airlines, climate change and carbon pricing

Last Updated: 11 December 2011
Article by David Hodgkinson

Most Read Contributor in Australia, October 2017

Key Points:

Notwithstanding action by some states either individually or collectively, action by the EU and other governments means that it is unlikely the aviation emissions problem will be successfully addressed anytime soon.

The main object of the Commonwealth's climate change legislation passed by the Senate last month – the clean energy bills which establish an emissions trading scheme (ETS) from 1 July next year – is to give effect to Australia's obligations under the United Nations Framework Convention on Climate Change (the UNFCCC) and its Kyoto Protocol (Kyoto) and to support a global response to address the climate change problem.

The UNFCCC provides a framework for future action and cooperation by states on climate change; it does not set out legally binding limits on emissions for parties to the Convention. Unlike the UNFCCC, Kyoto does set legally binding limits on (developed) state parties" emissions of greenhouse gases, and does so for the commitment period 2008 – 2012.

But Kyoto also does something else: Article 2(2) provides that developed state parties "shall pursue limitation or reduction of emissions of greenhouse gases... from aviation... working through the International Civil Aviation Organization" (ICAO). In other words, aviation is excluded from the world's primary climate change instrument. It leaves the aviation emissions problem up to ICAO.

International aviation represents a significant and growing source of emissions. However, ICAO has failed to reach any kind of consensus on a comprehensive approach to aviation and climate change.

Given aviation's absence from Kyoto, and ICAO's failure to successfully address the aviation emissions problem, some states – and coalitions of states – are taking action to include aviation, but not without difficulty. Such action and such difficulty are outlined below.


Rather than paying a carbon price through amendments to fuel tax credit and excise schemes, domestic Australian airlines may choose to participate in the Commonwealth's ETS from mid-2013 through an opt-in arrangement provided for in the legislation – Part 3, Division 7 of the Clean Energy Act.

Regulations will be developed in 2012 to support such participation.

For airlines, it offers an opportunity to be able to opt in to the carbon pricing scheme as it may enable airlines to source abatement measures at least cost. Put another way, airline participation in the ETS enables carriers to manage both their fuel and carbon-cost liability more effectively.


Under Directive 2008/101/EC on the inclusion of aviation in the European Union's ETS, all flights (EU and non-EU) landing at or taking off from any airport within an EU member state from 1 January 2012 must surrender emissions allowances equal to the emissions created from the entire flight. Most of these allowances (85%) will be allocated to the airlines for free.

The EU ETS would, thus, include Australian airlines landing at or taking off from any airport in the EU.

International airlines (led by those in the US) oppose the proposed inclusion of aviation in the EU ETS and have challenged its legality in the European Court of Justice (the ECJ). The ECJ's Advocate General has issued a non-binding opinion in which she recommended that the ECJ find the scheme legal.

The United States and others

Following the Advocate General's opinion, in late October, the US House of Representatives approved a measure that would make it illegal for US airlines to comply with the EU law (although there is no indication that the US Senate will do the same). If the legislation does pass the Senate, however, airlines would be unable to fly to and from Europe without breaking either a federal US law or an EU law.

Finally, in early November, ICAO – again, the body charged under Kyoto with addressing the aviation emissions problem – through its Council endorsed a working paper approved by 26 states including the US, China, Russia and India calling on the EU to exclude non-EU carriers from the EU ETS. It also adopted a non-binding declaration contesting the EU's plan to include international airlines.

A sectoral agreement for aviation? A "bottom-up" approach?

Notwithstanding action by some states either individually or collectively, action by the EU and other governments means that it is unlikely the aviation emissions problem will be successfully addressed anytime soon. It also appears unlikely that, at the UNFCCC/Kyoto climate change conference this month in South Africa, major emitters – developed or developing states – will enter binding agreements to reduce emissions, whether as part of a Kyoto "second commitment period" post-2012 or otherwise.

One alternative approach to moving forward may be to break the climate change problem up into different pieces and address the pieces in more specialised fora. This decentralized approach might not be sufficient in itself to substantially address the climate change problem. But if the UNFCCC continues to be stalemated, perhaps a decentralized regime, in which smaller groups of like-minded countries address specific issues, and in which countries and regional groupings take parallel action on their own (without attempting to include those states not in agreement with them), might emerge – a "bottom-up" rather than a "top-down" approach.

Such an approach could include a sectoral agreement for aviation, which would avoid countries taking specific action and remove the aviation emissions problem from the UN. Or it could include a sectoral agreement where airlines rather than states were parties to a global, airline-driven aviation emissions agreement.

As one commentator said recently, "since an agreement among the major emitters is unlikely anytime soon, we should seek progress where we can, through whatever means and in any forums that are available."

You might also be interested in ...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.