EU at odds with rest of world over "carbon tax" for airlines

The EU’s carbon trading plan will exempt airplanes with CO2 emissions that add up to 10,000 tons annually. Thus, a B777 airliner flying from Shanghai to London, a distance of approximately 5,500 miles, will emit 222 tons of CO2. If the airliner has three flights to Europe each week, the exemption quota will be used up in three weeks.

The aviation world is virtually unanimous in opposition to the European Union's new restrictions on air carriers' carbon emissions when flying within Europe. Under the current EU plan, all airlines flying into airports within the European Union will have to reduce their emissions next year by 3 percent from average levels between 2004 and 2006, or buy carbon permits to make up the difference. The costs to the airlines will be passed on to passengers, making the cost of a ticket from North America more expensive.

The United States is fighting the case at the European Court of Justice, arguing that the EU has no legal right to regulate American carriers or flight emissions that are released over other countries or in international airspace.

According to the terms of the EU emissions trading system, companies that exceed their emissions targets have to buy carbon permits from other companies that earned them by emitting less carbon than they were allowed.

American carriers project that they will end up spending $3.1 billion on the carbon permits by 2020. That could ultimately raise the price of a trans-Atlantic ticket as much as $57 for a flight from New York to London, according to some industry estimates.

Annie Petsonk, a lawyer who attended for the Environmental Defense Fund and who previously worked for the Justice Department, said: “The E.U. system is not a tax—if you don’t want to pay you can reduce your emissions.”

Canadian airlines have joined the fight. The National Airlines Council of Canada, which represents Air Canada and Air Transat, has lent its support to a legal challenge being mounted against the plan, which will be heard by the EU’s high court in Luxembourg Tuesday.

Meanwhile, India has threatened to go to the World Trade Organization against the EU if it fails to withdraw the carbon tax, which it considers an unfair trade practice. India's 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.

China is also opposed to the EU's "carbon tax."