India, China, Russia, and the US will lead the dissenters meeting in Moscow this month as they decide whether to retaliate against the EU's decision to place a carbon tax on all airlines entering or leaving the EU.
Rumoured options on the table include restricting or charging over-flights by European carriers, but this would only hurt airlines already subjected to the tax, which would seem spitefully anti-competitive – a case of political wrangling that hits no one but the taxpayer.
The EU’s move, by contrast, is not only fair on an environmental level – why should the most polluting mode of transport be exempt from carbon taxes? – but fair on a competition level. All airlines, after all, will be subject to the same scheme.
A lot of the debate has centred on the legality of the EU’s decision, with American and Canadian airlines arguing that aviation cannot be brought into the ETS on the grounds that it contravenes the Chicago Convention on civil aviation,the Kyoto Protocol on climate change,and the Open Skies Agreement liberalising rules on international aviation because it imposes tax on fuel consumption and because it applies to airlines flying outside the EU. The European Court of Justice (ECJ) dismissed these arguments, however, allowing the move to go ahead.
The legal argument lost, more than 30 countries are planning to look at other means of scuppering the EU’s tax, but all this smacks of protectionism over the one taxation issue for which international cooperation is vital.
The EU, as a bloc of 27 countries, is the ideal vehicle to coordinate tax policy to tackle environmental problems like climate change that do not respect national boundaries. If the world is to meet its emissions targets, unilateral action, whether through regulation or tax, will not be enough.
India, China, Russia and the US could learn a valuable lesson from the EU if they stopped letting off hot air over the ETS and started working together on common tax policies to reduce hot air in the atmosphere. Only then will everyone, taxpayers and governments alike, get the fairest deal possible.
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