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Tax on airlines emission - EU suspends carbon tax

23rd November, 2012

The European Union has temporarily suspended implementation of its new tax on airlines based on their carbon emissions. The suspension must still be endorsed by the European Parliament and the European Council and it will be effective for a period of one year. This means that airlines will not be required to surrender their carbon credits for flights operating in 2012.

The present move, as per the reports, is attributed to certain positive steps in the International Civil Aviation Organisation’s meeting earlier this month. In this ICAO meet, it has been agreed to establish a high-level group to develop a global system to tackle airlines’ carbon emissions by the time of its next general assembly in September 2013.
 
As per the scheme, the airlines, moving into and out of the European Union, were required to surrender carbon credits in respect of their full journey, to the EU. The scheme, aimed to reduce environmental pollution, is seen, in some quarters, as exercise of extra jurisdictional powers by the EU inasmuch as carbon emissions by the airlines while in the territory of another nation are to be counted towards the airlines' obligations.

Earlier, India along with USA, China, Brazil, Russia and 25 other countries had opposed the EU’s unilateral decision raising fears of global trade wars. The group has already chalked out retaliatory measures against the EU which included barring national airlines to participate in the EU’s scheme, reviewing bilateral service and open skies agreements with European countries and also imposing similar levies on European airlines. Presently, while India and China have already asked their airlines not to participate, the US House of Representatives has only this month cleared the bill to protect US airlines from this new EU tax.
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