Not strictly bizav – but this issue affects anyone who goes up in an aeroplane in Europe.
Ulrika Lomas of Tax News in Brussels reported today that the International Air Cargo Association (TIACA) is calling for the European Union to stop pushing through its Emissions Trading Scheme (ETS) for aviation and instead pursue a global agreement of aviation carbon emissions through the International Civil Aviation Organization (ICAO).
Connie Hedegaard, TIACA’s Industry Affairs Committee wrote to the EU Climate Action Commissioner to criticise four key points arising from the upcoming legislation, due to be enforced from January 1, 2012. Any airline landing or taking off inside the EU to take part in the regional bloc’s emissions trading scheme.
This has gone down a storm with the rest of the world – NOT. Any carriers flying to Europe will be have to buy permits to allow them to emit additional tons of carbon dioxide above a predetermined cap. Worst case scenario if they don’t comply could mean they would be fined or even have to suspend operations into the EU.
Hedegaard says, “By directly regulating conduct outside of EU airspace, the EU ETS encroaches upon the sovereign authority of each State over its own airspace. The Chicago Convention also prohibits any levies on international flights except on a cost basis ‘related to the provision of facilities and services for civil aviation’.”
IATA reckons that the cost to airlines of purchasing the necessary carbon allowances will rise from USD1.3bn in 2012 to USD3.5bn in 2020. Additionally, EU member states do not have to use the taxes levied to reduce carbon emissions.
She points out that this will hamper the aviation industry’s “ability to continue investing on its own in greener technologies.
There could be other knock on effects, such as carriers choosing to fly less direct routes, that would actually increase carbon emissions. She cites the case of a direct flight from Hong Kong to Amsterdam, which has 5% lower emissions than the same flight with a stopover in Moscow. A stopover would sharply reduce the airline’s emissions charges.
Lomas writes that at an aviation seminar held on August 1, the Vice President of Environmental Affairs at the Air Transport Association of America, Nancy Young, noted that the scheme is ludicrous as analysis has showed that on a flight, for example, from San Francisco to London only 9% of emissions are emitted in EU airspace; the majority instead is emitted in US and Canadian airspace, but would face the same amount of taxation as an internal EU flight.
Japan, Australia and New Zealand have all announced they are considering their own cap-and-trade emissions schemes, and China said in July that it planned to commence regional pilot schemes, with the aim of establishing a national cap-and-trade regime by 2015. This would lead to double taxation for carriers.
Unsurprisingly from the country that loves to litigate, United States airlines have already begun legal proceedings, arguing that the system violates the Chicago Convention, which grants individual countries the right to complete and exclusive sovereignty on taxation issues within their territory.
Hefty airline taxation is already impacting the British tourism and airport industry directly with the rise of departure tax from the UK. I recently spoke with Azran Osman-Rani, CEO of Air Asia X, who told me that Asian passengers are frequently now opting to fly into the UK, and take the train to Paris and stay there for a few days, which costs roughly the same amount as UK departure tax on premium seat.
Most people would agree green is good. It’s time for the Brussels Eurocrats to take a proper look at the impact of ETS and carve out a more effective way of cleaning up an industry that is already working hard to clean up its act.