The following information was released by Worldwide ERC:
In Short:
As a result of strong international as well as internal pressure, the European Union (EU) has temporarily suspended its plan to curb air carrier carbon emissions and impose a tax on international flights that originate or end within countries that are part of the European Union as well as Iceland and Norway. EU officials announced the one-year delay following the November 2012 meeting in Montreal of the International Civil Aviation Organization (ICAO) which is an agency of the United Nations. The ICAO has been working for several years on an international regulation on aviation emissions but until recently the EU did not believe the ICAO had been making progress and thus the need for the air carbon tax plan.
Full Story:
During a press conference on November 12, 2012, EU Commissioner for Climate Action Connie Hedegaard announced that the EU would be suspend its carbon tax on air carriers. Ms. Hedegaard stated that the ICAO in its November meeting had made meaningful progress toward an international agreement to curb carbon air emissions and that the EU would therefore delay its carbon air emissions tax for one-year. While Ms Hedegaard stated that the EU is hopeful that an agreement will be reached by the ICAO, she reinforced that the EU tax would automatically be reinstated absent a deal. The one-year delay in the plan coincides with the conclusion of the ICAO General Assembly meeting in September of this year. The EU will assess next steps following the outcome of that meeting and whether an agreement is reached.
Despite the EU announcement, the U.S. House of Representatives on November 13 passed legislation (S. 1956) by unanimous consent directing the Secretary of Transportation to prohibit U.S. air carriers from participating in the EU carbon air tax plan if he determines a prohibition to be in the best interest of the U.S. The U.S. Senate had passed the bill by unanimous consent on September 22. The U.S. joined China and India which had already prohibited their air carriers from participating in the plan. The European Union Emissions Trading Scheme Prohibition Act of 2011 also directed the Secretary to enter into negotiations to find a solution to aircraft emissions and hold U.S. air carriers harmless from the carbon tax. President Obama signed the legislation into law (Public Law 112-200) on November 27.
The United States, China, India, Russia and several other nations strongly oppose applying the tax to non EU-based airlines and air carriers. Regardless of their opposition, only aircraft operators in China and India had failed to submit the information necessary to calculate 2013 tax bills. If the tax does ultimately go into effect, industry experts believe that the additional cost per round-trip fare for travel to Europe will range from about $5 to $30 depending on the distance between the origin and destination.
The European Union adopted the carbon tax on air transport in 2008 as part of the aviation directive to its Emissions Trading System (ETS). The ETS utilizes the "cap and trade" principle as the framework for EU policies to combat climate change and reduce greenhouse gases. The intent of the tax is to force airlines and other air carriers to purchase more efficient aircraft that use less fuel and thus emit less carbon dioxide.
Airlines and other air carriers will be allocated free allowances based on historical carbon dioxide emissions that can then be redeemed to offset future emissions. The base line for acceptable emissions is reduced in future years. Those air carriers exceeding emission levels can purchase allowances from other airlines and carriers which have credits, or will be fined the tax. While the tax went into effect on January 1, 2012, the first tax bills would not have been issued until April of this year.
U.S. and Canadian airlines tried to block the tax in court on grounds that it violates international aviation treaties and intrudes on national sovereignty. On December 21, 2011, the European Court of Justice ruled against the U.S. and Canadian airlines. When efforts to stop the carbon tax failed in court, China and India directed their national airlines to not provide the EU with the data necessary to determine their carbon taxes. China went even further by pressuring EU officials through EU aircraft manufacturers and their suppliers who rely heavily on business from non EU airlines.
In March 2012, China stopped the purchase by Chinese airlines of aircraft from European aircraft manufacturer Airbus in retaliation over the carbon tax. According to Airbus and industry analysts, the freeze of the orders could ultimately cost the aircraft manufacturer an estimated $12 billion and result in the direct layoff at Airbus of 1,000 workers and many more thousands of jobs by suppliers to the company. Soon thereafter, Airbus, French aerospace group Safran, German aircraft engine manufacturer MTU and six European airlines wrote to the governments of Britain, France, Germany and Spain which are the four countries that founded Airbus. The letter focused on the economic consequences that the retaliationagainst the tax would have on their respective companies. Despite the increased pressure from both outside and within Europe, EU officials have stated that they will not back away from the tax so long as no similar international plan is developed to reduce carbon emissions by airlines and other international aircraft operators.
U.S. government representatives have communicated their strong concerns over the tax to EU officials and have been involved with coordinated opposition against the tax. Last summer, the U.S. hosted a meeting in Washington, DC of representatives of 17countries which oppose the tax. The other countries participating were Australia, Brazil, Canada, Chile, China, Colombia, India, Japan, South Korea, Mexico, Nigeria, Russia, Saudi Arabia, Singapore, South Africa and the United Arab Emirates. While no formal declaration was reached, the participants were resolve in their opposition to the carbon tax but indicated their continued desire to address aircraft emission reductions through the ICAO.
In September 2011, twenty-six countries which opposed the EU carbon tax on air carriers convened a meeting in New Delhi of the ICAO Council and declared their support for the ICAO to address the issue. In February 2012, twenty-two countries sent a letter to EU officials asking that they cease moving forward on the tax and instead agree to have emission reductions addressed through the ICAO. One option for the U.S., which is supported by the U.S. aviation industry, would have been to file an Article 84 against the EU. An article 84 is a compliant filed by an ICAO member against another member about an aviation issue which is then considered by the ICAO Council. However, with the EU decision to delay the carbon air emissions tax, the U.S. will likely join others in resolving the issue through the normal channels of the ICAO.
Posted by Tristan North
Copyright 2013 States News Service
