EU Green Tax Sparks International Outrage

As many as 30 different countries, including the United States, China and Russia, have joined forces to oppose a European Union edict to impose fines on international air carriers using its airspace.  Opposition has become so strident, that the issue has the potential to escalate into a full-blown trade crisis.

Effective January 1, 2012, the EU began subjecting international flights to its controversial “emissions trading scheme (ETS),” which imposes fines for carbon emissions that exceed a predetermined, government-authorized allocation.  ETS is similar to the “cap and trade program,” which has been a source of great debate in the United States.

The EU first announced its intention in 2009, and that announcement drew immediate and harsh rebukes from across the globe.   In the U.S., the Air Transport Association of America filed suit to challenge the EU’s legitimacy to exercise such power under international law.  That lawsuit was denied, in December 2011 by the Court of Justice of the European Union.  The U.S. Congress is expected to formally express its opposition to the carbon tax in the coming weeks.

In China, that country’s Civil Aviation Administration issued a directive banning domestic airlines from complying with ETS, and ordered that no fines be paid.  China estimates that it will be assessed as much as $125 million in annual ETS fines.

“We hope that the EU understands the global negative response to its scheme and cancels or revises its plan,” Chai Haibo, deputy secretary-general of the China Air Transport Association told ChinaDaily.com.

According to Reuters, China, India and other countries have called the EU law a violation of their sovereignty.  To consolidate their opposition, a meeting took place in Moscow in late February that included representatives from 26 nations opposed to ETS.  Participants reportedly agreed to a list of retaliatory measures, which include “barring national carriers from participating in the ETS and lodging formal complaints with the International Civil Aviation Organisation (ICO).”

For its part, the EU affirmed that any congressional action could “harden diplomacy” and result in an all-out trade war.  Do you agree with the EU’s effort to minimize emissions by imposing fines?