Air cargo: EU set to charge U.S. airlines for carbon tax

An edict from the European Union (EU) focused on emissions reduction is drawing the ire of the United States Congress and the air cargo industry.

Under its so-called Emissions Trading Scheme (ETS), the EU is calling all airlines to pay taxes to the EU as part of a “cap and trade” for carbon allowances in an effort to reduce air emissions created as a result of their flights in EU airspace.

The EU ETS was created in 2005. According to the EU, the ETS places a cap—or limit—on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. This is scheduled to take effect for the airline industry on January 1, 2012.

The United States House and Transportation Infrastructure Committee made its opposition to the ETS clear, explaining it has no intention of participating in this program.

“This appropriately named EU scheme is an arbitrary and unjust violation of international law that disadvantages U.S. air carriers and kills U.S. aviation jobs,” said House Transportation and Infrastructure (T&I) Committee Chairman John L. Mica (R-FL) in a statement. “The message from Congress and the U.S. government is loud and clear: the United States will not participate in this ill-advised and illegal EU program.”

The House T&I Committee this week introduced legislation—H.R. 2954, the European Union Emissions Trading Scheme Prohibition Act of 2011—that it said directs the Secretary of Transportation to prohibit U.S. aircraft to operators from participating in the EU’S ETS. They added that the bill also instructs U.S. officials to negotiate or take any action necessary to ensure U.S. aviation operators are not penalized by any unilaterally imposed EU emissions trading scheme.

Under the ETS, the T&I Committee said that there is no requirement that generated revenue would even be put toward researching and developing technology to improve emissions.

Officials from The Air Transport Association of America said that the ETS could cost the U.S. airline industry more than $3 billion through 2020, capital, which it said could support more than 39,200 U.S. airline jobs, with costs potentially doubling if the costs of carbon allowances continue to rise, which they have in recent years.

“The EU ETS violates international law, including the sovereignty of the United States and imposes an illegal, exorbitant and counterproductive tax on U.S. citizens, diverting U.S. dollars and threatening thousands upon thousands of jobs,” said ATA Vice President, Environmental Affairs Nancy Young in testimony before the House Transportation and Infrastructure Subcommittee on Aviation. “Working with industry, continued U.S. Government opposition is crucial to bringing the EU back to the global negotiating table.”

The organization said that U.S. airlines have made tremendous strides in improving fuel efficiency and greenhouse gas reductions through billions of dollars in investments in things like fuel-saving aircrafts and engines, among other efforts. And it noted that the U.S. airlines industry has improved its fuel efficiency by 110 percent between 1978 and 2009, which equates to the carbon dioxide savings of removing 19 million cars from the road per year. What’s more, it said that the airline industry is responsible for 2 percent of all U.S. GHG emissions.

According to a New York Times report, under the EU ETS, all airlines flying into airports within the EU will have to reduce their emissions in 2012 by 3 percent from average levels between 2004 and 2006 or buy carbon permits to make up the difference.

“In Europe, we’re trying to do something with climate change and we now have emissions targets for sector after sector,” said Connie Hedegaard, the European Union’s commissioner for climate action, in the NYT report. “We now include power producers, we now include manufacturing, so how can we not include aviation?”

It is clear that U.S.-based air cargo shippers are not receptive to the EU ETS either.

National Industrial Transportation League President Bruce Carlton told LM U.S. trading partners are not allowed to discriminate on the basis of flag country flag or registration.

“If everybody, including the EU carriers, were being covered, there might be more of a basis or at least a legal basis for this,” he said. “On its face, this would appear to be a discriminatory tax, which is dealt with in the World Trade Organization structure. Regional schemes do not work. In international trade, these schemes are going to be bound up with all sorts of problems.”