EU ETS: The wrong approach

The moment any Europe-bound plane starts its engine--before it begins to taxi on the runway, no matter where that runway is--the European Union begins to tax the airline and its passengers under the guise of its Emissions Trading Scheme (ETS).

There are three major problems with the ETS. First, the EU's assertion of regulatory and tax authority over emissions from aircraft while on the ground in the United States and in its airspace is a violation of national sovereignty. Left unchecked, the consequences of this are enormous, as airlines will be exposed to multiple, overlapping taxes and regulations that may be imposed by any and all nations of the world. Second, this unilateral tax siphons away from aviation the very funds needed to continue to invest in new aircraft, retrofits, and operational innovations that bring real environmental improvements. Third, adding insult to injury, the revenue collected does not even have to be used to help the environment: Under European law, countries may use this money for any purpose.

While airlines and the aviation sector more broadly should care about this, so too should all U.S. businesses and policymakers. Simply put, if the EU can tax emissions over an entire flight merely because that flight touches down in Europe, what prevents it from imposing emission taxes on the import of U.S.-manufactured goods?

With fuel as the airlines' largest and most volatile expense, U.S. airlines have dedicated themselves to reducing fuel burn and resulting carbon emissions. Between 1978 and 2011, the U.S. airline industry improved its fuel efficiency by 120%, resulting in emissions savings equivalent to taking 22 million cars off the road annually. U.S. airlines burned 11% less fuel in 2011 than in 2000 even though they carried almost 16% more cargo and passengers. The U.S. airline industry is committed to continuing this trend as supporters of the worldwide aviation industry's plan for further fuel efficiency improvements by an average of 1.5% a year through 2020 and carbon-neutral growth thereafter. However, meeting these goals requires supportive policies from governments in areas like air traffic management modernization and aviation technology research and development--taxation policies like the EU ETS undermine them.

Airlines are working closely on a proposal with the International Civil Aviation Organization, the division of the United Nations responsible for setting aviation standards. The aviation industry and its government allies strongly believe that ICAO is the proper body to establish any aviation emissions program. ICAO approved the outline of the airlines' emissions-reduction proposal back in 2010 and continues to move it forward.

Until now, diplomacy has failed to deter the EU from taxing the world's airlines. The Obama administration, congressional leaders from both political parties, and most non-European nations denounce the EU ETS. They correctly call it an illegal money grab. But EU officials show no sign of backing off. Congress and the administration need to take action--both legal and legislative--to block this unlawful tax. A global approach to lowering emissions would be welcome, European taxation is not.