EU airline carbon tax could spark trade war with China and the US

EU airline carbon tax could spark trade war with China and the US

By Elodie Jacquet

December 23, 2011

News agencies were abuzz this morning with the news that the EU  has approved of a carbon tax on all airlines flying in European air-space. Despite objections from several countries, European Commissioner responsible for Climate Connie Hedegaard announced today that the “carbon tax policy will be implemented as scheduled”. Needless to say, reactions were prompt!

Reuters reports the following from China:

BEIJING, Dec 22 (Reuters) – China on Thursday criticised a decision by Europe’s highest court to charge airlines for carbon emissions on flights to and from Europe, calling it a “green barrier” that could spark a trade war.

“This is a trade barrier in the name of environmental protection and will strike a wide blow to passenger benefits and the international airline industry,” the state-run Xinhua News Agency said in a signed commentary.

“It will be difficult to avoid a trade war focused on an aviation ‘carbon tax’,” said Xinhua, whose editorials reflect the official government position.

The European Court of Justice ruled on Wednesday against a group of U.S. airlines that challenged a European law requiring a carbon cap on all airlines flying to and from European Union airports and forcing them to purchase permits from Jan. 1 under the EU’s emissions trading plan.

Earlier this month, the China Air Transport Association urged China’s airlines to refuse to take part in the emissions scheme, and not to submit CO2 monitoring plans to EU officials.

CATA says the scheme will cost Chinese airlines 800 million yuan ($123 million) in the first year and more than triple that by 2020.

“The EU’s hurried and unilateral levy of a ‘carbon tax’ on aviation is essentially a kind of green barrier, and thus in the name of environmental protection it is usurping other countries’ interests,” Xinhua’s Thursday commentary said.

It did not threaten specific consequences such as taking legal action against the EU. (Reporting by Terril Yue Jones)

China was not the only country angered by this new tax, US airlines  denounced a “discriminatory” and “an excise tax (VAT) on fuel prohibited by the Chicago Convention” on charges for airports and filed an appeal in UK  High Court. Secretary of State Hillary Clinton, in a letter dated 16 December addressed to the Commissioner for Climate Connie Hedegaard urged the EU to “give up” on this measure, or “at least to defer “implementation, otherwise the US would take ” appropriate measures “.

US Department of Transportation  immediately issued a statement that “both at the judicial level or at the political level, the United States are strongly opposed to the EU imposing its policy approach”. The communique also pointed out that several counter-measures could be taken, but did not elaborate.

Just after COP17 it seems a little petty to be complaining about this tax when neither the US nor China will be  bound to make any significant effort to curb their  carbon emissions before the agreement that the world hopes to reach by 2015. With adaptation to climate change becoming more expensive with time, it seems only fair that countries taking measures to reduce their emissions also levy taxes to ensure they will be able to pay for costs incurred by too many years of global inaction.

(Icon photo courtesy of Roberto Verzo, Flickr)

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