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Carbon tax on airlines upheld

South China Morning Post – Oct. 7, 2011

World airlines vow to continue their fight against emissions charge plan after court adviser finds in favour of European Union’s cap-and-trade system

The world’s aviation industry yesterday suffered a setback in its fight against a European Union plan to make foreign airlines pay hundreds of millions of dollars in carbon tax for flights to and from the EU.

The blow came when an adviser to the European Union Court of Justice told judges that the decision to impose the EU’s carbon cap-and-trade system on airlines beyond the region’s borders would be lawful, advice the court is likely to follow.

“The inclusion of international aviation in the EU emissions trading scheme is compatible with the provisions and principles of international law invoked,” advocate general Juliane Kokott wrote in a legal opinion for the Luxembourg-based court, rejecting arguments filed by the international aviation industry.

Several carriers and airline associations have challenged the 2008 decision by the 27 EU states to force airlines flying in and out of Europe to buy the permits under the bloc’s Emissions Trading System (ETS), fearing that it will cost their industry US$1.2 billion a year.

“Foreign governments are unlikely to accept this interpretation of the validity of the ETS being imposed unilaterally on foreign airlines,” said Andrew Herdman, director general of the Kuala Lumpur-based Association of Asia-Pacific Airlines. “This is certainly not the end of the matter.”

Tony Tyler, the head of the International Air Transport Association, said: “We are disappointed with the opinion but it is only part of a complex set of developments concerning” the carbon-trading system.

Tyler said that “many governments were rightly concerned about the infringements on sovereignty” and warned that 20 states had signed a declaration “vowing to challenge the plan’s extra-territoriality” at the International Civil Aviation Organisation, a United Nations agency.

Last month, the China Air Transport Association warned that dozens of airlines would be involved in another lawsuit it aimed to lodge by the end of the year.

China has said it fears its aviation sector will have to pay an additional 800 million yuan (HK$974.6 million) a year on flights originating or landing in Europe, and that the cost could be almost four times higher by 2020.

“If they charge us, we will charge back,” Wei Zhenzhong, the secretary general of the China Air Transport Association, told an industry conference in Hong Kong last week.

Cathay Pacific (SEHK: 0293) said: “This decision represents a green light towards an emerging patchwork of complex, bureaucratic and punitive regional schemes which will ultimately have no impact on improving the environment and will hit passengers.”

The ETS, started in 2005, is the cornerstone of the EU’s plan to fight global warming and cut carbon dioxide emissions by 20 per cent from 1990 levels by 2020.

EU Climate Commissioner Connie Hedegaard said that while the EU doesn’t want to “dictate the world”, aviation could not be excluded from such measures forever.

“I am glad to see that the advocate general’s opinion concludes that the EU directive is fully compatible with international law,” she said. “The EU reaffirms its wish to engage constructively with third countries during the implementation of this legislation.”

Bloomberg, Agence France-Presse

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