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US Senate Forbids Airlines To Comply With EU ETS

by Mike Godfrey, Tax-News.com, Washington

26 September 2012


Following the passage by the United States House of Representatives in October last year of a bipartisan bill to ban US airlines from complying with the European Union’s emissions trading scheme (ETS), the Senate has now unanimously passed similar legislation.

The EU ETS has been 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 are required to immediately begin purchasing emissions allowances, but are only expected to remit the sums in 2013.

The opinion has previously been expressed in Congress that the EU ETS is inconsistent with long-established international law and practice, including the Air Transport Agreement between the US and the EU; directly infringes on the sovereignty of the US; and undermines on-going efforts at the International Civil Aviation Organization (ICAO) to develop a unified, worldwide approach to reducing aircraft greenhouse gas emissions.

The US, along with the 16 other non-EU countries opposing the scheme, favours a global approach to avoid any conflict of sovereignty and to avert a potential trade war. The US government has already announced it would reject any unilateral EU ETS on airlines kicking in before 2020, and would hope that a global proposal could be discussed during ICAO’s next meeting of ICAO.

In that respect, while the Senate bill - the European Union Emissions Trading Scheme Prohibition Act - would prohibit operators of US civil aircraft from participating in the EU ETS, it also provides that the US Secretary of Transportation and the Administrator of the Federal Aviation Administration should “use their authority to conduct international negotiations … to pursue a worldwide approach to address aircraft emissions.”

In addition, the Secretary of Transportation would have to hold a public hearing at least 30 days before imposing any prohibition determined to be in the public interest, and may reassess that determination after any amendment of the EU ETS, the adoption of any subsequent international agreement, or the enactment of legislation or the issuance of a final rule in the US to address aircraft emissions.

However, it was reported that Connie Hedegaard, the European Climate Commissioner, has cast doubt on the likelihood of a deal within ICAO in an emailed press statement. She questioned the willingness of the US to “seal a meaningful global deal that will facilitate action.”

In the meantime, John Thune (R – South Dakota), together with Claire McCaskill (D – Missouri) the co-sponsors of the Senate bill, are pressing for their bill to be accepted by the House of Representatives, and for the final legislation to be presented to President Barack Obama for his signature. If the House does not adopt the Senate bill, however, the differences could still be worked out in a joint conference committee.

In any case, the US airline industry welcomed the Senate’s action. For example, Airlines for America (A4A), the industry trade organization for the leading US airlines, commended the Senate. "Congress has spoken - US airlines should not be subjected to this illegal scheme that amounts to little more than a cash grab for the EU as none of the funds collected are required to be used for environmental purposes," said A4A President and CEO Nicholas E. Calio.

He called the EU ETS “a breach of US sovereignty that actually limits our ability to build on our strong environmental record by investing in new and more fuel-efficient aircraft." He confirmed that, between 1978 and 2011, US airlines have improved fuel efficiency by 120%, and that US airlines carried 16% more traffic last year than in 2000 while using 2.3bn fewer gallons of fuel.

Calio said A4A supports a global sectoral approach to aviation climate change policy under the ICAO, as does the National Business Aviation Association, whose President and CEO Ed Bolen has previously called the scheme "fatally flawed," adding that, "as badly as the airlines are treated, general aviation is treated even worse" under the EU-ETS, which is “unfair, intrusive, administratively burdensome and fails any reasonable cost-benefit test for the environment.”

TAGS: environment | compliance | tax | business | tax compliance | law | aviation | legislation | carbon tax | United States

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