EU imposes emissions tax on airlines

It will hamper investment in technology to reduce emissions, says air transport association

Published: Saturday 17 September 2011

Starting January 1, 2012, airlines using the EU airspace would have to pay a fee for any emission that exceeds a set cap. This fee is part of the EU-ETS (EU-Emissions Trading Scheme), which is the EU’s key tool to reduce industrial greenhouse gas emissions. The move has been on the cards since 2008, but as the date draws closer, airline associations are getting more vocal about their unwillingness to pay.

Tax imposed under EU Emissions Trading Scheme (EU-ETS)
Meant to reduce industrial greenhouse emissions
Cost to airlines purchasing the necessary carbon allowances may more than double, says one estimate
The idea of the tax is to lower emissions from the aviation sector, which accounted for about 10 per cent of UK greenhouse gas emissions in 2005 and is expected to increase to 15 per cent by 2020 and 29 per cent by 2050. The aviation industry, though, wants the EU to suspend the inclusion of the aviation sector in the scheme and instead pursue a global agreement of aviations carbon emissions through the International Civil Aviation Organisation, a UN body entrusted with reducing the environmental impact of the industry and coordinating and regulating international air travel.

In a letter to the EU Climate Action Commissioner, the International Air Cargo Association has expressed that the scheme violates the sovereign authority of a country over its own airspace. The association stressed that such market measures need international consensus. The inclusion of the aviation sector in the EU-ETS would restrict the industry’s ability to invest in greener technologies because of the tax. The cost to airlines purchasing the necessary carbon allowances would rise from US $1.3 billion in 2012 to $3.5 billion in 2020, estimated the International Air Transport Association. Because of the additional expenditure, the progress that the sector was making in reducing emissions through more efficient aircraft and operating procedures would be affected, the letter said.

There are ways to skirt the emissions charges. For instance, airlines might reduce the number of direct flights and introduce stopovers or use longer routes. While this would help in avoiding the emissions charge, it will not necessarily help the environment because the carbon emissions from direct flights are lower.

Also, several issues related to the emissions charge remain unresolved. For instance, a flight from San Francisco to London emits the maximum in the US and Canadian airspaces; its emissions on the EU airspace is 9 per cent, but the airline would be expected to pay the same tax as any other internal EU flight. The industry has also expressed fears of double taxation because of the tax. The ETS provides for a tax exemption “for a portion of the trip” if a similar tax is imposed in the home country of the airline, but the clause is vague and there are no details on how it will work out. “I am appealing to the EU for a more workable emissions trading scheme,” said Steve Ridgway, chairperson of Association of European Airways.

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