Europe’s Green Airline War: A new tax on jet carbon emissions invites retaliation

Worth A Look, Climate, Frontier Centre

Europe’s anticarbon crusade failed to extend the Kyoto Protocol this month, but the boys in Brussels don’t give up easily. Now Europe may kick off a trade war with its new scheme to tax airlines on carbon emissions.

The rule, which goes into effect January 1, will apply to all airlines regardless of nationality and to all flights to or from Europe. Airlines that refuse will be subject to fines of €100 per ton of CO2 that exceeds the EU’s limits, and they could be banned from operating in Europe.

The International Air Transport Association estimates the rule will cost €900 million next year and at least €2.8 billion annually by 2020. That’s a lot for an industry that expects to turn a combined global profit of €3.5 billion next year. The EU admits the scheme will raise ticket prices and dampen consumer demand, which may be the point: To make carbon-spewing international travel accessible to fewer people.

In September the U.S. joined Brazil, India, China, Russia and 21 other governments in declaring that “the unilaterally imposed [European] measures were inconsistent with international legal regimes.” The 1944 Chicago convention on aviation gives every signatory “complete and exclusive sovereignty over airspace above its territory.”

Brussels shrugged that off, and last week the European Court of Justice rejected a challenge brought by American and Canadian airlines. The ruling included the logical gem that while all EU nations ratified the 1944 convention, the EU itself did not exist at the time and thus cannot be bound by its provisions.

The European rule does allow exemptions for airlines whose governments are taking “equivalent measures” to penalize carbon emissions, though airline sources say a patchwork of carbon-reporting and taxation schemes would be even more unpalatable than the EU’s blanket measure.

Meanwhile, the EU’s trading partners are threatening to retaliate. Beijing has floated a cut in Chinese airlines’ Airbus orders, and Chinese carriers are launching their own lawsuit. New Delhi is mulling a payback tax, and Moscow hasn’t ruled out increasing overflight fees on European carriers.

The U.S. has stated its “strong legal and policy objections” to the move, and this month Secretary of State Hillary Clinton and Transportation Secretary Ray LaHood warned that Washington “will be compelled to take appropriate action” if the EU doesn’t back down. The measures could include a tax on European airlines, judging by the request the U.S. made this month to nine European carriers for information on their 2012 carbon allowances and 2010 revenues.

The anticarbon movement has already done enough harm by increasing the cost of energy and wasting money on subsidies for ethanol and other renewables that can’t compete on their own. Now it may start a trade war, which may be the only language that Eurocrats understand.