India to protest EU carbon tax on airlines

The Union government will protest against Europe’s carbon trading scheme for aviation at the bi-annual India-EU summit in New Delhi next month.

Air India, Jet Airways and Kingfisher Airlines, which fly to Europe, will get hit by the scheme, which caps aviation emissions and require airlines to purchase carbon credits to cover excess emissions. According to an industry source, the scheme may cost each Indian carrier up to euro 2.5 million (Rs 17 crore) next year. The cost varies for each of the airlines, depending on the number of flights to Europe. The scheme comes into effect from January 1.

The European Court of Justice had rejected a petition by US and Canadian airlines against the carbon trading scheme. India, China and the United States are leading the opposition against the European Union Emission Trading Scheme (EU ETS), since the move to impose emission curbs is unilateral and, in some ways, extra-jurisdictional in nature. Industry bodies like the International Air Transport Association are also against the scheme.

The European court ruled that including airlines in the ETS “infringes neither the principle of territoriality nor the sovereignty of third states.’’

In September, India chaired a meeting of non-European states to voice concern against the carbon trading scheme. According to government sources, Prime Minister Manmohan Singh is expected to take up the matter with the president of the European Commission at the India-EU summit in New Delhi in February. The government has directed all three airlines not to deal directly with the European Union, and all correspondence and sharing of emission data would be routed through the government. Government secretaries would meet airline representatives on Saturday to decide on further action.

“We are awaiting further directions from the government,’’ an Air India executive said, claiming ETS would not financially burden the national carrier at the current level of operations. Airlines have to open carbon trading accounts and the actual trading (or release of unutilised carbon allowances by airlines) would only happen at the end of 2012.

How exactly does the EU ETS work? The European Commission has chosen 2004-06 as the baseline period. Under the scheme, actual emissions of all the airlines are capped at 97 per cent of the baseline period for 2012. Airlines, including those from India, were required to submit emission data for 2010. These have been granted free carbon allowances or credits based on their 2010 submissions. A total of 85 per cent of carbon allowances have been shared free among participating airlines and the remaining 15 per cent has to be purchased. Actual trading of carbon allowances would begin at the end of 2012. Airlines which do not comply with the norms face fines, possible impounding of planes and operating bans in European countries.

“The scheme would definitely impact the airlines. Free allowances, too, have been capped and this means for additional flights, airlines would have to pay purchase credits,’’ an airline source said. “We will have to think twice before we decide to launch additional flights to Europe,’’ said an Air India executive.

“Europe is marginalised on the issue, as the whole world is against the decision. Europe has been stubborn. It would be a counter-productive stance, and would face repercussions,’’ said Sanat Kaul, chairman of International Foundation for Aviation and Development (IFFAAD).

“Including aviation in the EU, ETS would not directly affect or regulate air transport tickets. However, aircraft operators may have to buy emission allowances in the market, in addition to those allocated to them. With a carbon price of around €13 per tonne and majority of emissions rights allocated free to airlines, the average extra cost to airlines would be less than $6 a passenger for a London-Delhi round trip,” European Union’s India office had said in statement.