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U.S., Other Countries Threaten to Retaliate Against EU on Airline Emissions "Taxes"

The U.S. sent a strong letter to the European Union warning them that the EU’s airline emissions trading scheme -- set to start in January 2012 -- should be halted or postponed. If not, the letter from U.S. Secretary of State Hillary Clinton said, “. . . we will be compelled to take appropriate action.” According to the Financial Times (registration required), 42 other countries, including major economic powerhouses, such as China and Brazil, signed onto the letter, which seemed to be timed just before the EU’s highest court renders its decision.

On Wednesday the EU’s Court of Justice is expected to rule in favor of the EU’s plan to charge airlines -- domestic and foreign -- for their carbon emissions. The EU scheme would cover aviation in its controversial -- and collapsing -- cap-and-trade system for reducing carbon emissions. All planes landing or taking off in the EU would be forced to pay for their emissions, whether those were emitted over EU airspace or not.

Expanding the failing carbon trading system during a period of failing economies seems to be an act of self-flagellation on the part of the EU in the name of environmentalism. Or maybe they are hoping to bring other countries down to a "level playing field" of wasting billions of dollars that would flow into their coffers. A 2009 study by Matt Sinclair of the UK’s Taxpayers’ Alliance estimated that from its introduction in 2005 through 2008, the EU’s carbon trading scheme has cost European consumers €93 billion. Just last month The Australian reported that the Swiss bank UBS had issued a study stating:

. . . the European Union's emissions trading scheme has cost the continent's consumers $287 billion for "almost zero impact" on cutting carbon emissions, and has warned that the EU's carbon pricing market is on the verge of a crash next year.

In a damning report to clients, UBS Investment Research said that had the €210bn the European ETS had cost consumers been used in a targeted approach to replace the EU's dirtiest power plants, emissions could have been reduced by 43 per cent "instead of almost zero impact on the back of emissions trading."

If the EU stands by its plan to exert control over airlines of other countries and to charge them for emissions, many have argued that it would attack the sovereignty of other countries, destroy the international legal system in place for airlines -- the Convention on International Civil Aviation -- put onerous economic burdens on airlines, and raise the cost of international travel and delivery services.

Retaliation would seem inevitable, which could plunge the fragile world economy into a destructive trade war.