EU carbon tax to be levied on airlines next year as planned

22 Dec 2011 by ReggieHo

The European Court of Justice on Wednesday threw out a case led by North American airlines to challenge a European Union decision to include all carriers flying to and from - and within - Europe in its Emissions Trading Scheme.

And despite a warning from US Secretary of State Hillary Clinton that her government would “take appropriate action” in response to the ETS, the Union has announced that the plan will come into effect as scheduled on January 1, 2012.

US Department of State’s Deputy Assistant Secretary for Transportation Affairs Krishna R Urs said in a statement: “The [US Government] is not a party to the case. Nonetheless, we have been monitoring it closely. We continue to have strong legal and policy objections to the inclusion of flights by non-EU air carriers in the EU ETS. We do not view the Court's decision as resolving these objections. The United States strongly supports the goal of combating climate change and reducing GHG emissions from international aviation. The path the EU has chosen is hampering progress towards a multilateral solution that is more likely to bear fruit in terms of concrete progress in limiting greenhouse gas emissions from aviation. We urge the EU to work with its international partners in the International Civil Aviation Organization to address the valid concerns that have been raised by the international community.”

Under the scheme, overall CO2 emissions of the aviation industry are capped, initially at 97 per cent of 2005 emissions levels, and from 2013 onwards at 95 per cent. The carriers will have to surrender one allowance for every tonne of CO2 emitted on a flight involving Europe as a destination. Operators emitting more than their allocated amount of CO2 will either have to reduce emissions or procure extra allowances.

The EU top court ruled that the EU's approach was "valid," and that it "infringes neither the principles of customary international law at issue nor the Open Skies Agreement" covering trans-Atlantic flights, as alleged by the carriers who launched the case.

In a luncheon organised by Pacific Asia Travel Association (PATA) earlier this month, Cathay Pacific chief executive John Slosar said that the ETS would initially add about HK$50 (US$6.40) to a ticket from Hong Kong to Europe. “It’s not much to start with but I think the fear is that the tax is going one direction - it will only go up after they have started.”

For more on the EU ETS, stay tuned for Business Traveller Asia-Pacific’s cover story in the January/February 2012 issue.

Reggie Ho

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