INDIA THREATENS WTO ACTION AGAINST EU AVIATION CARBON TAX PLANS

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28 july 2011

[For a spirited defense of the EU aviation carbon tax, we reprint after this article a response to its critics by Connie Hedegaard, the EU's climate commissioner.]

India threatens to move WTO against EU’s carbon tax

by Chetan Chauhan, Hindustan Times. July 28, 2011

India has threatened to move World Trade Organisation (WTO) against the European Union if it fails to withdraw carbon tax to be imposed on flights landing or taking off from European airports from January 2012.

Even though the additional per passenger cost would be around six US dollars, Indians would be paying approximately about one billion US dollars a year to Europe. Similar cost for China would be about four billion US dollars.

Money is not the worrying factor for India, as a senior environment ministry official puts it. But, the concern is that the tax will give kick-start similar unfair trade practices in the name of fighting climate change. Europe is already talking about imposing a similar carbon tax on imported high carbon emitting fuels from 2013-14.

In the world’s first, the European Union earlier this year decided to bring aviation sector from January 2012 under EU Emission Trade Scheme, which imposed a penalty for failing to keep carbon emissions within 10,000 tonnes a year.

It would mean that a Boeing 747 flying from Delhi to London will exhaust this quota within a month and thereafter, will have to pay the environmental degradation tax for landing on European airports. The decision was taken after EU found that aviation sector was spewing 20 % more carbon dioxide into the environment than previously estimated.

India has not bought the European claim and Indian environment minister Jayanthi Natarajan lodged a formal protest with the European Union this week terming the decision as “unfair” trade practice. Natarajan in a letter urged Europe to withdraw the unilateral tax till a consensus is built on the issue at United Nations Framework Convention on Climate Change.

“We believe European carbon tax is just a start of a new global tax regime to adversely hit business of emerging economies such as India and China…We will have no option other than to approach WTO if it is not withdrawn,” a senior government functionary said.

The issue would be discussed at a meeting called by Cabinet Secretary Ajit Kumar Seth on Friday, where officials from ministries of civil aviation, commerce and environment will participate. “We are seeking legal opinion on how we can approach WTO,” the functionary said, while explaining that aviation is not trade but service sector. WTO covers only trade sector.

The issue of carbon tax came up at a recent UNFCCC meeting in Bonn, Germany, where India along with the biggest group G-77 plus China opposed it. They termed it as an unfair practice against the developing world as under UN protocol to flight change the historical polluters --- rich countries --- have obligation to reduce carbon emissions and pay to the developing world to adapt to adverse implications of climate change. “By levying carbon tax, developing countries would be paying to rich nations,” a government official said.

Environment ministry officials said India will also raise the issue at the next meeting of Basic countries --- a group of India, China, Brazil and South Africa – in August to garner more support against the decision.

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Time to get serious about aviation emissions!

by Climate Action Commissioner Connie Hedegaard, European Commission website, 31/05/2011

Aviation's contribution to climate change is forecast to grow substantially in the future unless we act. As most other sectors are already subject to measures, it is only reasonable that this sector should also contribute to fight climate change. Almost 20 years after countries across the world in the UN Rio declaration agreed on the need to "promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution" it seems high time that this polluter-pays-principle is finally also applied to aviation's greenhouse gas emissions. How can we ever hope to make ordinary citizens of the world to play their part in tackling climate change if the financier from Hong Kong or London or the business man from Guandong or Frankfurt is not asked for any contribution whatsoever in respect of the significant emissions that he incurs on an intercontinental flight?

The U.N.'s International Civil Aviation Organization (ICAO), in fact already in 2004 unanimously endorsed the idea of emissions trading, and expressly recognised that one of the most promising avenues to pursue this was to "incorporate emissions from international aviation into States’ emissions trading schemes". This is precisely what the EU decided to do when it subsequently took the initiative to include aviation in the EU's emissions trading system (EU ETS).

Emissions from airplanes affect the climate regardless of their nationality. Aviation is a competitive business, where on any given route, all carriers must be treated equally regardless of their nationality to ensure legality, avoid distortions of competition and maximize the environmental impact. Consequently, the EU legislation applies to all outgoing and incoming flights.

This legislation is fully consistent with international law. Indeed, ICAO experts long ago, and after carefully studying the matter, concluded that "there are no provisions in the Chicago Convention that address or would appear to prohibit the development and implementation of such programmes". It is also consistent with the policy of ICAO, which endorsed emissions trading precisely because it was the most effective economic instrument for tackling aviation emissions, when compared to alternatives such as taxes or charges.

A lot of misinformation and misunderstandings about the EU rules and the costs for carriers circulate – the fact is that the vast majority of emissions rights (85%) are given for free to airlines, while the remaining 15% of the cap is auctioned. Auction revenues will be used to tackle climate change in the EU and third countries, inter alia, to reduce greenhouse gas emissions, to adapt to the impacts of climate change in the EU and third countries, especially developing countries, to fund research and development for mitigation and adaptation, including in particular in the fields of aeronautics and air transport, to reduce emissions through low-emission transport and to measures to avoid deforestation.

The EU fully recognizes that ultimately global action is required, but this will take time to develop. In order not to duplicate efforts, the EU's legislation clearly envisages that if a country outside the EU were to take equivalent measures then all flights from that country could be exempt from the EU scheme. But honestly, in Europe we cannot see why a student flying back home should pay for his pollution while the Chinese businessman should not. We are ready to engage constructively with other partners about such an approach and encourage other governments to join in and take responsibility for controlling aviation's emissions. We have always been and continue to be open to discuss how best to combine our efforts in addressing the impact of aviation on the global climate.

Connie Hedegaard

EU Commissioner for Climate Action


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