US-Europe fight over airline emissions could help talks on climate change
With a limited outlook for international climate negotiations, some hope can be found in a battle between the US and Europe over the regulation and taxation of airline emissions. An industry-level agreement could be a model for compromise on international climate policies.
With a limited outlook for international climate negotiations, some hope can be found in a battle currently underway between the United States and Europe over the regulation of airline emissions. This is the first major international conflict over a specific climate policy – and it may be the catalyst necessary to get the European Union, the US, and China engaged in serious bargaining at an industry level.Skip to next paragraph
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The fight is between the EU and several other countries, including the US and China, regarding carbon taxes on airlines. The EU has a cap-and-trade system for greenhouse gas regulation, the European Trading System (ETS), which requires European industries that emit greenhouse gases to buy “credits” sufficient to cover their emissions. This program includes European airlines, which must purchase credits for their airline fleet’s emissions on intra-European and international flights.
Starting January 2012, the EU extended this tax to foreign airlines for the segment of the trip landing in any European airport. The issue is now coming to a head because the emission credits from foreign airlines are due in April 2013. The penalty for failing to pay is 100 euros per credit and an obligation to make up the emissions credits deficit the following year.
The EU attempt to regulate incoming airline emissions has been extremely controversial internationally. In August 2012, 17 countries met, including China, India, Japan, South Africa, and the US, and issued a statement opposing the inclusion of foreign airlines in Europe’s cap-and-trade system. India and China have announced that their airlines will boycott the scheme as well.
At the end of November, the US raised the stakes again by passing legislation that could forbid American companies from complying with the EU law. The EU Emissions Trading Scheme Prohibition Act, which passed with the support of the airline industry, is designed to shield American companies from EU emissions tax liability.
It directs the secretary of Transportation to determine whether prohibiting domestic airlines from participating in the European system is in the public interest. If it is not, then US law will ban domestic airlines from paying any taxes under Europe’s cap-and-trade rules.
However, the legislation does not permit federal agencies to reimburse airlines for penalties incurred by their refusal to pay the EU’s tax, so airlines may be stuck between an EU obligation to pay a tax and US obligation not to.