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EU Holds Ground on Airline CO2 Cap; Trade War Coming?

The European Commission will move forward on its plan to include aviation in its emissions trading scheme, WSJ reports.

According to the plan, EU airlines will have specific CO2 allocations and will pay a penalty of EUR100 for every additional ton of CO2 emitted. As reported earlier, the limits will apply not only to European businesses but to others, such as AMR’s American Airlines, that operate flights in Europe.

(Much more on this topic here.)

Willie Walsh, the former BA chief executive who now heads the International Airlines Group, says that the Chinese, American and Russian governments could all retaliate if their carriers are forced to participate in the European ETS, The Telegraph reports.

A group of U.S. carriers has mounted a legal challenge to the legislation. China is also considering its next move. “I believe we have to take legal action,” the BBC reports Wei Zhenzhong, head of the China Air Transport Association, as saying.

Even though EU airlines say the ETS will make them less competitive, the EU’s governing bodies, which call the trading system a “pollution ceiling,” not a tax, say that its plan to include airlines beginning January 1 is entirely consistent with international law and that “we do not intend to back down.”

According to WSJ:

On May 24, Association of European Airlines chairman Steve Ridgway, who is also chief executive of Virgin Atlantic, and Tom Enders, chief executive of commercial aircraft manufacturer Airbus, warned that the inclusion of the aviation industry in the emissions trading system will create a trade conflict with the world’s most powerful economic and political players.

Also:

In a letter to EU transport commissioner Siim Kallas dated May 26, [Nathalie] Kosciusko-Morizet, [France’s minister for transport and ecology] said that if airlines based outside the EU didn’t comply with the new law in the same way as European airlines, they would benefit from “an unwarranted competitive advantage.”

Tim Clarke, president of Emirates airline, told the BBC, “We are now perhaps the highest taxed entity of any business on the planet today.”

The aviation sector will be the second-largest industry in Europe’s carbon trading system.

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