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November 16, 2006
EU To Put Green Tax On Intercontinental Flights

The EU wants to start charging airline passengers for the pollution caused by their transportation. The draft legislation would affect all carriers coming in and out of Europe, effectively taxing American airlines without any opportunity to debate the fees:

AIRLINE passengers would pay up to £27 extra for a return ticket to cover the environmental damage caused by their flights, under European Commission proposals to address climate change.

Draft legislation to be published next month would require all flights arriving or departing from European Union airports to buy permits to cover their carbon dioxide emissions. ....

This will infuriate the United States and many other countries because it would affect all flights into and out of Europe, regardless of their origin or destination. US airlines would have to buy permits to cover their emissions on their European routes.

The Association of European Airlines (AEA) said that the proposal could provoke a trade war between the US and the EU, and raise the risk of flight restrictions and sanctions on European goods.

The commission previously appeared to favour a scheme that covered flights only starting and ending within the EU. But the document concludes that an intra-EU scheme would be far less effective, reducing CO2 emissions by 44 million tonnes compared with 183 million tonnes if all arriving and departing flights were included.

The election of the Democrats to Congress has generated many predictions of an end to free trade. Apparently the EU wants to start early on this process. The imposition of a tax on transcontinental flights by the EU will almost certainly prompt new fees on European carriers wanting to land in the US. In fact, the Department of Homeland Security has had a number of conflicts with the EU on airline security arrangements, and the US might decide to ban carriers who don't fully comply with American demands in the future.

The EU claims that the tax will lower the amount of emissions from the airline industry by forcing them to buy new planes. However, the EU subsidizes its airlines and Airbus, its airplane manufacturer. That allows European companies to have newer fleets, which reduces their emissions and would allow them to get less expensive permits. All airlines would have to start a new accounting regimen for their emissions, subject to EU oversight, which points to even more taxes and fees down the road.

This is an obvious protectionist racket. Charging the fees would not force carriers to upgrade their planes; in fact, it would take money out of their hands that might otherwise be used for that purpose. In the competitive US market, an extra $40 or so might price a few customers out of the European trips, but the bigger impact will be the accounting cost for the new reporting. The EU wants American carriers to lose any competitive edge. It's basically the opening salvos of a trade war.

Free trade may be a quicker casualty of the new political paradigm than first imagined. Don't expect this to end with the airlines. Agricultural tariffs will expand next, and after that, the field's wide open.

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Posted by Ed Morrissey at November 16, 2006 5:16 AM

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