Europe is willing to discuss its new carbon emissions tax for airlines with disgruntled governments, but has no plans to scrap the levy, a top EU official said yesterday.
“We’re ready to negotiate within our framework,” Siim Kallas, European Commission vice president and transport commissioner, said at an aviation conference in Singapore. “We aren’t trying to dominate the world.”
The EU imposed the tax, known as the emissions trading scheme, on Jan. 1 in a bid to curb emissions of climate-changing gases, but money will not be collected until next year. Under the system, airlines flying to or from Europe must obtain certificates for carbon dioxide emissions. They will get free credits to cover most flights this year, but must buy or trade for credits to cover the rest.
Airlines and governments have complained the tax is too costly and was implemented unilaterally by Europe. Industry leaders are warning the disagreement could spark a trade war between Europe and the rest of the world.
“I’m very worried,” said Tom Enders, CEO of Airbus, the world’s largest commercial airplane maker. “What started out as a solution for the environment has become a source of potential trade conflict.”
Last week, China barred its carriers from paying the charges or other fees without government permission, and Russia, India and the US have also voiced opposition.
Asian carriers say the carbon tax unfairly penalizes them because the charge is based on the distance of the flight.
Malaysian long-haul budget carrier AirAsia X said last month it plans to eliminate flights to Europe, in part because the carbon tax increased costs and made flights less profitable.
“The longer you fly direct, the more you’re penalized,” AirAsia X CEO Azran Osman-Rani said. “There was hope that the EU would back down, but they didn’t. Now they have to deal with China, good luck with that.”
The International Air Transport Association (IATA), which represents 240 airlines, is urging the EU to negotiate new carbon emissions guidelines through the International Civil Aviation Organization.
“Non-European governments see this extraterritorial tax collection as an attack on their sovereignty,” IATA CEO Tony Tyler said yesterday. “Aviation can ill afford to be caught in an escalating political or trade conflict.”
Tyler, who previously was CEO of Cathay Pacific Airways, reiterated IATA’s forecast that airline profits would likely fall to US$3.5 billion this year from US$6.9 billion last year as a slowing global economy and high fuel costs pinch earnings.
Kallas said the inability for governments to forge a global deal on reducing carbon emissions prompted the EU to act.
“The EU asked for years and years that there be a global solution on climate change,” Kallas said. “We’re protecting our citizens.”