European Union Emission Tax to Raise Air Fares to Europe

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By Suresh Kr Pramar

The European Union has directed Air India, Kingfisher and Jet Airlines to submit their carbon emission details. It has set January 15 as the deadline for these Airlines to open a carbon trading account. The three Airlines, which fly to Europe on a regular basis, have been told to submit their flight details to Europe, fuel consumption and emission details.

The three Airlines have decided to pay the tax under protest. Air India reportedly has already paid the others are likely to do so soon. According to reports the tax is likely to cost domestic carrier billions of dollars in airspace emission fees. India says that the Tax is an “extraterritorial imposition” of the EUs policy on other countries. India plans to levy a retaliatory tax on European carriers.

The EU proposals have generated a raging controversy. Airlines in the United State of America and China have opposed the tax Numerous airlines argue that the system is in effect a tax on aviation, which would be banned by longstanding international agreement. However, the EU counters that the system is not a tax but represents fair regulation in order to tackle climate change. As a result of the system, passenger ticket prices are likely be pushed up, though some airlines may choose to absorb some of the costs.

In a letter sent to EU officials, the US secretary of state, Hillary Clinton, and the US secretary of transportation, Raymond LaHood, urged the EU to reconsider and re-engage with the rest of the world. “Absence of such willingness on the part of the EU, we will be compelled to take appropriate action,” they said in the letter.

Suresh Kr Pramar, Executive Director, Centre for Training & Research in Responsible Business

Suresh Kr Pramar, Executive Director, Centre for Training & Research in Responsible Business

In the US  legislators are attempting to make it illegal for their airlines to comply with EU rules on carbon, and it is understood that China is issuing similar guidance, in a serious escalation of hostilities.  The proposed legislation if passed  would make it illegal to comply with the EU law.The US and Chinese governments have threatened a trade war over the issue, and airlines have protested that if the EU rules are allowed to go ahead, they will be landed with billions of dollars of new costs in the next few years.

Under the EU’s proposals, all airlines operating flights taking off or landing in member states would be subjected to its emissions trading scheme. The scheme had been introduced for carbon-intensive industries who are issued permits to produce carbon dioxide. Cleaner companies can trade these permits with laggards, giving them an increasing incentive to cut carbon.

Airlines also argue that the International Civil Aviation Organisation (ICAO) is preparing its own system of carbon trading, which could be operating from 2013. EU officials are doubtful that this would come up to the same standards as its scheme and could be open to manipulation by the airlines. Campaigners said the move to have ICAO bring in a scheme was merely a delaying tactic, and pointed out that ICAO has been talking about such a scheme for more than five years, without any concrete result as yet, with no guarantee of a future outcome.

The Air Transport Association of America, American Airlines and United Continental filed a case against the decision in  the London High Court of Justice. The Court referred  it to the court in Luxembourg. In a decision issued recently the Luxembourg Court has upheld the EUs right to impose the Tax

“The directive including aviation activities in the EU’s emissions trading scheme is valid,” the court said in a statement.  ”Application of the emissions trading scheme to aviation infringes neither the principles of customary international law at issue nor the open-skies agreement.”

Bill Hemmings, programme manager at Brussels-based campaigning group Transport and Environment, has said: studies of the cumulative effect of civil aviation since its inception showed it was responsible for about 4.9% of carbon and equivalents in the atmosphere. As that amount is growing, while emissions must be cut to avoid dangerous global warming, aviation would be an increasing part of the problem.

A recently  report finds that airlines are spewing 20 percent more carbon dioxide into the environment than previously estimated and the amount could hit 1.5 billion tons a year by 2025. That’s far more than even the worst-case predictions laid out by the International Panel on Climate Change.

The report, “Trends in Global Aviation Noise and Emissions from Commercial Aviation for 2000 to 2025,” produced by the U.S. Department of Transportation, Eurocontrol, the Manchester Metropolitan University and the technology company QinetiQ. claims that emissions on this scale will comfortably outstrip any gains made by improved technology and ensure aviation is an even larger contributor to global warming by 2025 than previously thought,”

European airlines have warned of a damaging trade war with the US, Russia and China if Brussels pushes ahead with plans to include carriers in the emissions trading scheme  in a move that will put fares up by €40 and cost the industry €1.1bn (£980m If this is not sorted out in the next six months we run the risk of a trade conflict between the EU and third countries,” said Ulrich Schulte-Strathaus, secretary general of the AEA, whose members include British Airways, bmi and Virgin Atlantic.

Schulte-Strathaus said some airlines could be forced to cede routes to non-EU carriers because they would not be able to pass extra costs on to passengers. Non-EU carriers, by contrast, will be able to offset the higher costs as the rest of their network will not fly via the EU. IATA the trade body whose members include British Airways, Air France and American Airlines, said the ETS would  increase annual industry costs by more than €1bn to Europe’s airline industry expected to make a profit of $500m (£304m) this year. The worldwide profit, generated by Asian and US carriers, is expected to be $8.6bn.

( Suresh Kr Pramar, Executive Director, Centre for Training & Research
in Responsible Business, Noida   09213133042)

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