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'Lousy' EU ETS Slammed In Congressional Hearing

by Leroy Baker, Tax-News.com, New York

11 June 2012


The United States government remains "strongly opposed" to the decision of the European Union (EU) to extend the Emissions Trading Scheme (ETS) to international aviation, US Transport Secretary Ray Lahood told a Congressional committee.

Testifying before the Senate Committee on Commerce, Science and Transportation on June 6, Lahood said that while the US shares the EU's goal of reducing global carbon emissions, the ETS scheme is "lousy bad policy" and "the wrong way to achieve the right objective".

"The EU needs to engage constructively to find a global approach that works for the rest of the world and allows it to set aside ETS in relation to foreign carriers," he said. "We strongly urge the EU to cease application of the ETS to international aviation in order to help accelerate our efforts to forge a global solution. We need to see real signs of flexibility from the EU. The global community needs to believe that the EU is genuinely willing to work on a global deal to help us accomplish our shared goals on the environment."

Earlier, Lahood told the Senate panel that the US government is "strongly opposed, on both legal and policy grounds", to the imposition of ETS on US and other non-EU airlines.

"Secretary Clinton and I wrote to our counterparts in the EU and member states strongly objecting to the imposition of EU ETS on US air operators. We called on the EU to halt EU ETS application to non-EU airlines and re-engage with the rest of the world to find a global solution for aviation greenhouse gas (GHG) emissions at the International Civil Aviation Organization, also known as ICAO. Absent such willingness on the part of the EU, we advised that the US would be compelled to take appropriate action."

The EU ETS was extended to aviation activities from or to European soil on January 1, 2012, to provide a solution to taxing aviation emissions, which were excluded from the Kyoto Protocol. Under the ETS, airlines operating into and out of the EU, regardless of how long that flight is in EU airspace, will be required to surrender varying emission allowances, and will be required to purchase any additional permits outside of their free allowance.

Airlines are required to immediately begin purchasing emissions allowances, but are only expected to remit the sums in 2013 meaning that Europe will have until April 30, 2013 - when airlines will be required to buy polluting rights for 2012 - to decide whether to follow through with the penalties for non-compliance provided for in the EU Directive. In the event that airlines fail to comply, the European Union has said it will impose fines of up to EUR100 (USD125) for each tonne of carbon dioxide emitted without the payment of a permit, and eventually enforce an EU-wide ban on the offending airline.

The European Commission has claimed that the EU ETS has had a positive impact in reducing overall emissions, by 2% in 2011 compared with 2010, to 1.889 billion tonnes of CO2-equivalent. However, a number of nations are opposed on the grounds that the ETS breaches the Chicago Convention, which prohibits taxation of international aviation, and last March the heads of some of Europe's major airlines and aviation engine manufacturers have called upon EU leaders to take action and stop an escalating trade conflict with China and other countries.

In their letters to the leaders of France, Germany, Spain and the UK, the nine CEOs, including the bosses of Airbus, British Airways, Lufthansa and Virgin Atlantic, warned that countries opposed to the ETS are preparing countermeasures and restrictions on European airlines, such as special taxes and traffic rights limitations. The list of suspensions, cancellations and punitive actions is expected to grow, the CEOs cautioned, as other important markets continue to oppose ETS, a situation they say that "Europe can ill-afford in the current economic climate".

TAGS: environment | compliance | tax | business | European Commission | law | aviation | environmental tax | carbon tax | United States | trade | European Union (EU) | Europe

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