Tony Tyler, Director General and CEO of the International Air Transport Association (IATA), is very concerned that the dispute about which flights will be included in the European Union emissions trading scheme (ETS) will make ICAO-facilitated talks over a global offsetting scheme more difficult.

“It is going to distract everybody from the ICAO solution,” Tyler tells Aviation Week.

As part of the agreement on a global market-based measure reached earlier this year at the ICAO assembly, the European Union agreed to limit EU ETS to intra-European flights and committed to talks with third countries about inclusion of the portion of international services operating in European airspace. Later, the European Commission stated that it would include them partially anyway.

“They did not even talk to anybody,” says Tyler, adding that the approach is “very ill advised. It is just not going to fly.”

He believes that some countries will order their airlines not to participate or will launch retaliatory action against Europe. Tyler sees some hope in British, German and French moves away from the Commission’s approach, given their weight in the EU. But he is also concerned that no agreement is reached by the end of March, which is when theoretically the original ETS would snap back.

IATA members are on track to reach their own goal of improving fuel efficiency by 1.5% annually until 2020. In 2012, they got to a 1.7% improvement, according to the association’s own figures. However, Tyler points out that airlines will in total not be able to reach the carbon neutral growth target for 2020 without offsetting measures.

“That is why a market-based measure is required,” he says. “One of the unknowns is (the development of) biofuels.” But Tyler expects that “technology including biofuels will make carbon-neutral growth painless eventually.”

In his view, negotiating the MBM will require a lot of difficult compromises between carriers that are already big and don’t need to grow much more and those that are still small and have ambitious expansion plans. “We face those issues internally in IATA, but the differences can be bridged,” Tyler believes.