Wings Magazine

Canadian Airlines fight EU carbon tax

July 5, 2011, Ottawa - Canadian airlines have joined the fight opposing the European Union’s plan to include the aviation industry in its emissions trading plan at the start of next year.

July 5, 2011  By Scott Deveau Financial Post

Under terms of the EU strategy, any airline flying in or out of Europe would be forced to buy carbon permits for 15 per cent of their emissions based on 2010 levels. They would also be required to reduce their carbon dioxide emissions by 3 per cent in 2012, and by 5 per cent from 2013 onward, based on their average emissions between 2004 and 2006.

The National Airlines Council of Canada, which represents the country’s largest carriers, including 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.

The battle is being led by the Air Transport Association of America, which opposes the EU’s unilateral approach to including the aviation industry in its carbon trading plan as of Jan. 1, 2012. But the NACC and the International Air Transport Association [IATA] have gained formal intervenor status in the case and contributed to the joint submission.

The EU emissions trading system (ETS) is the cornerstone of the region’s efforts to reduce carbon dioxide emissions 20 per cent by 2020 compared to 1990 levels.


But global airlines are opposing the plan.

The industry argues that inclusion of airlines in the emissions system will cost global airlines about ¤1-billion ($1.4-billion) collectively in 2012 before “skyrocketing” to ¤4-billion by 2020.

They also argue the plan violates fundamental principles of several international treaties, including the Chicago Convention, the EU-U.S. Open Skies Agreement, the Canada-EU Air Transport Agreement and the Kyoto Protocol.

George Petsikas, NACC’s president, said that under the terms of those treaties no state has the right to regulate activities outside its own borders.

Mr. Petsikas said that is exactly what the EU is endeavouring to do by taxing emissions not only over its own airspace, but above Canada, across the Atlantic, and anywhere on the flight path to Europe.

“Our belief has always been that if the Europeans decided to only charge for emissions within their airspace, they would be on much more solid legal ground,” Mr. Petsikas said.

Anthony Concil, IATA spokesman, said the industry has some concerns about the wording of the EU legislation, which says revenues derived from the airlines under the plan “should” be used to tackle climate change, through reforestation or research, for example. But the legislation does not specifically mandate that those funds be used in that manner.

IATA’s concern is that the revenue derived from ETS will simply find its way into the general coffers of the 27-member states, Mr. Concil said.

IATA has long opposed the EU’s unilateral approach, instead favouring its own collective target of halting the industry’s emissions growth by 2020, before cutting it in half by 2050, through a series of initiatives including the purchase of new aircraft and by things like making air traffic control systems more efficient.

The industry argues that by diverting revenue away from the carriers, the EU plan would impede upon their ability to purchase new planes.

The EU has admitted the plan is not perfect. But it has also put efforts in place to ensure that the funds do not find their way into the general budgets of its member states, according to Peter Liesse, the member of the European Parliament leading the initiative.

Still, the NACC said that unilateral approach adopted by the EU will have a “significant impact” on Canadian airlines, which are already reeling from high fuel prices.

“Our view is that there are other ways to achieve these goals without whacking the industry, and our customers especially,” Mr. Petsikas said. “Nobody is going to be able to absorb this. It is all going to translate into higher costs for our customers.”


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