The pressure has been intensifying on the European Union (EU) from external and also internal sources to eliminate its carbon tax on international flights that originate or end within EU countries. Since the carbon tax took effect on January 1 of this year, the governments of non-EU countries with airlines that operate in the EU have stepped up efforts on the EU to stop the tax on grounds that it violates international aviation treaties and intrudes on national sovereignty. 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.
While EU officials continue to take a hard stance against international pressure on the tax, the same officials are now hearing stronger concerns from sources within the EU. In early March, the European aircraft manufacturer Airbus, French aerospace group Safran, German aircraft engine manufacturer MTU and six European airlines wrote to the governments of Britain, France, Germany and Spain about the economic consequences of the tax on their operations. The letter which included the airlines of British Airways, Air France, Lufthansa, Iberia, Virgin Atlantic and Air Berlin was sent to British Prime Minister David Cameron, French Prime Minister Francois Fillon, German Chancellor Angela Merkel and Spanish Prime Minister Mariano Rajoy. These leaders represent the four countries which founded Airbus.
The letter was sent after China in retaliation over the carbon tax blocked the planned purchase of Airbus aircraft by Chinese airlines. According to Airbus and industry analysts, the freeze of the orders could 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. Despite the concerns voiced by non-EU nations and now aircraft companies within Europe, the EU continues to hold firm on the tax and cutting carbon emissions for aircraft operators by 20 percent by 2020.
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 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 airlines and air carriers exceeding emission levels can purchase allowances from other airlines and carriers which have credits, or will be fined the tax. Exempt from the law are those commercial air transport operators that have 2 flights or less per day, emit less than 10,000 tons of carbon dioxide a year or use small aircraft of less than 5,700 kilograms. Also exempt are aircraft used for state, military, rescue, emergency or training purposes. While the tax went into effect on January 1, 2012, the EU won’t issue tax bills until 2013.
Prior to the heightened pressure, a vast majority of airlines and air carriers had applied for the free allowances. So far, airlines and air carriers are still preparing to reduce their carbon tax burden. It appears that U.S. Airlines have not yet incorporated into airfares any additional taxes or fees to European flights for offsetting the carbon tax. Industry experts believe that the carbon tax cost per round-trip fare will range from $5.25 to $31.50.
Posted by Tristan North