India opposes Europe's aviation tax set for the New Year

DURBAN -- Europe's looming carbon tax on non-European airlines could lead to more lawsuits and a trade war.
Written by Betwa Sharma, Correspondent on

Minister Jayanthi Natarajan expresses India's concern  at the 2011 climate talks

DURBAN,South Africa--Almost a week has passed since the chaotic climate change negotiations wrapped up here. But one unresolved issue from the U.N. talks will rear its head on the first day of the New Year. Experts are even concerned about it triggering a trade war between nations.

From Jan 1, the European Union will levy a carbon tax on aircrafts landing and taking-off from the airports inside the bloc.  By some estimates CO2 from air travel constitutes 3 percent of the total greenhouse gases. The money, according to the EU, will be invested in countering climate change. There is presently no money in the Green Climate Fund, which has to be financed by developed countries to the tune of $100 billion a year starting from 2020.

During the climate conference, EU diplomats pushed other countries to accept its new scheme. India and others, however, slammed the carbon tax as unilateral trade barrier. "The attempts like tax on aviation are really disguise for trade barriers," declared Indian Environment Minister Jayanthi Natarajan.

Three Indian airlines--Jet, Kingfisher and Air India--have regular flights into Europe. Kingfisher Airlines already registered losses of $93 million for the three months ending in September, which it blamed on higher fuel costs. The tax could cost these airlines millions of dollars annually as well as higher ticket prices for passengers.

The Geneva-based International Centre for Trade and Sustainable Development estimate--for a short haul flight of 480 km, the ticket price increase is between €2 and €4; for a medium haul flight of 1,400 km it is between €3 and €8, and for a long haul flight of 6,400 km it is between €10 and €30 ($13 and $39).

India, deeply suspicious about EU's motives, sees the tax as violating the principle of "common but differentiated responsibilities," which requires developed countries to shoulder the burden of tackling climate change.  A uniform tax further dilutes the "firewall" that divides the global North and South. New Delhi aggressively backs the U.N. convention on climate change that says, "Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade."

While India is threatening retaliation, the United States has already sued on the grounds that extending the carbon tax to non-EU flights is a violation of international law and impinges on national sovereignty. The European Court of Justice will reportedly give its final ruling on Dec 21. A preliminary opinion by the court shot down the U.S case.

In response, the U.S. House of Representatives passed a bill prohibiting its country's airlines from paying the carbon tax to the EU. The bill is pending in the U.S. Senate but experts sense that the Obama administration is not likely to put home airlines on a collision course with EU legislation.

Jo Leinen, chairman of the European Parliament's environment committee, described the U.S. prohibition as both “arrogant" and "ignorant." "Arrogant because we of course expect others to respect our laws as we respect others' laws and ignorant because they really don't see the growing part of emissions from this air traffic," he said at the climate talks in Durban. "I hope others in the U.S. are more clever and more thoughtful not to bring that law into reality."

China is also getting ready to sue the EU before the year ends.The International Air Transport Association (IATA), which opposes the tax, said that the carbon tax will cost $1.2 billion to airlines in 2012 when the industry's projected profit for the year is $4.9 billion. "But the EU’s unilateral and regional approach to ETS could not be more misguided," Tony Tyler, IATA’s Director General, said in September.

Other countries have been pushing for a global solution through the Montreal-based International Civil Aviation Organization (ICAO), which has 190 member nations. The E.U. says that it cannot wait for an elusive global solution. India, this year, led the effort for the passage of a non-binding ICAO resolution against the EU measure. It was backed by 25 other countries.

Travelers themselves offer various opinions on the matter. Anirudh Rastogi, an Indian lawyer based in Singapore, pointed out that it was bitter tonic to swallow for everyone including the EU, which could lose out on tourism and trade." The environmental benefits of this tax, just like those of the Kyoto Protocol obligations, come at a economic price to the countries that take these actions," he said. "As a customer, of course, I would be unhappy about paying more but not so much given that the extra cash will do some good."

Photo: Arnab Dutta

This post was originally published on Smartplanet.com

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