Delay of EU airline 'green tax' could still cost US $3.1bn

Delay of EU airline 'green tax' could still cost US $3.1bn
The postponement of the EU emissions programme could mean US airlines will still have to pay $3.1bln between 2012 and 2020. The US Congress has stepped in to protect US airlines from paying the EU ‘green tax’ saying it is unilateral and illegal.

The House action came a day after the EU which is facing protests from a number of countries and a possible trade war, said it was postponing enforcement for non-EU airlines.

One of the complaints from US airlines was that they would be charged even for the emissions made over the United States or the Atlantic on their way to European destinations. The US industry says it would cost them some $3.1bnbetween 2012 and 2020.

The “illegal” EU plan “amounts to little more than a cash grab for the European Union as none of the funds collected are required to be used for environmental purposes,” said Nicholas E. Calio, President and CEO at Airlines For America, a Washington – based group that represents leading US airlines.

The Obama administration has joined Congress in opposing the EU emissions program. “This is the wrong way to pursue the right objective,” according to Susan Kurland of the Department of Transportation responsible for international aviation talking to a Transportation Committee hearing last year.

While welcoming the EU’s decision lawmakers said it was still necessary for Congress to ensure that US airlines won't get taxed by the EU in the future. “The EU's announcement still does not recognize that its system is illegal and that a global solution, not just one deemed acceptable by the EU, must be the path forward,” said Sen. John Thune, who co-sponsored the bill in the Senate with Sen. Claire McCaskill.

“We want a long-term solution” to the emissions problem, said House Transportation Committee Chairman John Mica. “But we will not allow the United States to be held hostage.”

The EU cap-and-trade program began in 2005 with the capping of carbon dioxide emissions from power plants, refineries, steel mills and other industrial producers. From January this year it was expanded to include all airlines flying into and out of Europe. Airlines are issued permits to emit a certain amount of carbon dioxide. They can buy more credits if they emit more than their allotted amount or sell credits if they use less.

The move was strongly opposed by companies who said this will increase the cost of flights. The first payments had been due in April 2013, but this will now be deferred to November 2013. The Union expects the International Civil Aviation Organization (ICAO) to coordinate a worldwide model to control emissions in aviation. However, emission fees will be brought back if EU’s aviation regulator doesn’t work out a different solution with air firms.