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EU's Carbon Tax faces retaliatory action

2nd March, 2012

European Union’s decision to unilaterally impose a carbon tax on flights landing in, or taking off from, the Eurozone with effect from 2013 has been under severe criticism.

Last month about 30 countries including India, China, US, Russia and Brazil met in Moscow to chalk out further strategy to counter the European measure. As per reports, the measures may include filing court suits against the EU, taking the matter to the dispute settlement body of the WTO, suspending talks with European carriers on new routes, reviewing bilateral service and open skies agreements with European countries, barring national airlines from participating in the EU’s scheme and imposing retaliatory levies on EU airlines. Earlier, in a meeting held in Delhi, these nations had warned the EU against taking the unilateral decision when negotiations about greenhouse gas reductions are underway under the UN climate convention.

China has already issued orders to its airlines not to participate in the EU’s Emission Trading System while U.S. Congress is also considering an identical ban. There is speculation that the system could set off a "trade war" among nations as they impose similar retaliatory fees on EU-based airlines.
It is yet to be seen as to what would be the outcome of the dispute if it goes to the World Trade Organisation (WTO) but the European Court of Justice (CJEU) has already said that such measures do not violate any international treaty.
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