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UPDATED: March 7, 2014 NO. 4 JANUARY 26, 2012
Unfriendly Skies
Airlines around the world are angry over new EU emissions tax on flights to Europe
By Yu Lintao


The EU carbon tax plan requires all airlines flying to and from the 27 EU countries to buy permits for the carbon emissions they generate during entire flights.

"The tax scheme is unfair," said Shen Jiru, a research fellow with the Institute of World Economics and Politics at the Chinese Academy of Social Sciences (CASS). "It charges airlines money for carbon dioxide emitted during their entire flights, not only within EU airspace but also outside its airspace. It runs counter to the customary international legal principle that each state has complete and exclusive sovereignty over the airspace above its territory."

The extension of the ETS to international aviation is also a case of unfair competition. The EU can use the money it collects from other countries' airlines to subsidize its own aviation industry or its aircraft manufacturing sector. That will be an obvious breach of the WTO principle of free trade, Shen said.

Even if the tax is levied, the EU should return part of the tax dues to countries along the routes outside the EU, Shen added.

Zhang Min, another research fellow with the Chinese Academy of Social Sciences, said the EU's unilateral assertiveness on the aviation carbon tax is a major strategy on addressing its sovereign debt crisis and developing low-carbon industries. Since the EU holds a world-leading position in low-carbon technology, its carbon tax scheme on airlines would help it to set a precedent for carbon taxes on other high-carbon industries.

"Next, the EU will probably make new rules for the establishment of a carbon emissions trade market, which will severely hit industries and enterprises with high carbon emissions," Zhang said.

In addition, Zhang claims these rules would possibly constitute new non-tariff barriers for other countries to develop their green economies and be tantamount to so-called "low-carbon trade protectionism."

Zhou Chengxiong, a research fellow with the Institute of Policy and Management at the Chinese Academy of Sciences (CAS), said the tax scheme is in fact a "green tariff" and its main purpose is to help Airbus to defeat Boeing.

For quite a long time, U.S.-based Boeing has taken a dominant share in the large passenger jet market. In 2006, Airbus' new A380 entered service with an oil consumption less than one fifth of the Boeing 747.

"With the help of the carbon tax on airlines, the A380 will be much more competitive than the Boeing 747," Zhou said.


For international airlines, the tax means more operational costs, which will inevitably trickle down to the consumer, meaning more expensive air fares.

On the China-EU route, for example, based on statistics from the China Beijing Environment Exchange, a flight from China to Europe might increase 300 yuan ($50) per ticket.

The CATA estimated that the EU scheme might cost Chinese airlines about 800 million yuan ($123 million) on European air routes for carbon emissions in the first year and about 17.6 billion yuan ($2.77 billion) from 2012 to 2020.

"Instead of reducing carbon emissions, the EU is using environmental protection as an excuse and easy tool to make profits without specifications on carbon emissions reduction standards on engines or fuel," said Chai of the CATA.

As an issue essentially related to climate change, Chinese critics said the principle of "common but differentiated responsibilities" should be followed in the carbon tax plan of the EU. Therefore, the EU plan should not be applied to developing countries.

The principle requires that industrialized countries, with abundant financial resources and advanced technologies, should shoulder their historical responsibilities and make tangible moves to deal with their high per-capita carbon dioxide emissions. The principle is the cornerstone of the UN Framework Convention on Climate Change, adopted in 1992 and ratified by 192 countries.

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