US breaks ranks, moots global carbon tax system

NEW DELHI: In what could make the trade battle over EU’s carbon tax on aviation more complicated for India, the US has suggested that countries adopt a global carbon tax system under the International Civil Aviation Organization (ICAO) and adopt a worldwide cap-and-trade regime.

It had earlier decided along with the BASIC group — China, Brazil, South Africa and India — Russia and 20 other countries to oppose the EU move with counter-measures.
The US has asked for a meeting of 16 countries on the issue in Washington at the end of July where India too is invited.

The US has softened its opposition to the EU tax directive, stepping away from countries like India and China on the issue. It has suggested that countries move along the lines of the ICAO resolution which pushes for a global annual average fuel efficiency improvement of 2% until 2020 and an aspirational global fuel efficiency improvement rate of 2% per annum from 2021 to 2050.

The ICAO also recommended a collective medium-term global aspirational goal of keeping the global net carbon emissions from international aviation from 2020 at the same level. This is to be achieved by setting up a worldwide trading mechanism in emissions from the aviation sector.

But the ICAO does not adhere to the principles of apportioning responsibilities between developed and developing world as the UN climate convention does.

A global carbon tax regime on aviation would mean escalation of flying costs across the world and not just for travelers to the EU.

EU had taken the unilateral step of taxing aircraft flying into or via their airspace based on greenhouse gas emissions from airplanes, breaking away from negotiations within the UN Framework Convention on Climate Change. The tax is expected to add up to more than $1.5 billion starting 2013 and rise steadily. When it faced a barrage of criticism from other countries, it countered by suggesting that it would be as happy with countries deciding a global regime under the ICAO instead.

Developing countries have been averse to let the discussion on emissions from the aviation sector be taken out of the UN climate negotiations, where the balance of power sits better in their favour and the principles of deciding who should reduce emissions and by how much are already agreed upon.

ICAO is perceived by many as less ‘balanced’ in the decision-making process. They also see the EU tax as a trade measure to push the sales of its newer airplanes by setting constantly improving global emission benchmarks for the sector.

US too had opposed the EU carbon tax regime initially but stopped short of creating a domestic legal framework to ban its carriers from adhering to the EU directive on carbon taxes. Indian experts believe there are various domestic political and industry pressures at work in the US preventing it from taking on the EU with more than threats.

The US move is bound to stir up another round of negotiations between the BASIC countries as well as other key economies that have their growing aviation sector at stake.
TNN July 10, 2012