Business | Aviation

EU emissions tax must be scrapped

The Emissions Trading Scheme tax developed by the European Union places a disproportionate burden on the aviation industry

  • By Ernest S. Arvai, Special to Gulf News
  • Published: 00:00 November 14, 2011
  • Gulf News

The Emissions Trading Scheme tax developed by the European Union places a disproportionate burden on the aviation industry, which has done more to reduce fuel burn and improve environmental performance over the last decade than any other form of transportation.

Dwarfed by the auto industry, the taxes proposed for aviation by the EU represent a significant burden that, even with an offer to reduce initial years by 85 per cent, represent a foothold by politicians into a new revenue stream, which inevitably will be fully utilised.

Compounding the problem is the aggressiveness of the taxation, which extends beyond EU airspace to include flights operating elsewhere. Why should we trust the EU to allocate those funds globally to benefit mankind, especially since they have indicated no intention to do so? These environmental taxes will be going into the general funds of the countries imposing them, not toward environmental purposes.

The EU has violated International Aviation Consulting (IACO) rules and the Chicago Convention that governs international aviation by imposing these taxes. The airlines agree, and even the US House of Representatives passed legislation with bipartisan support (unusual given typical election year bickering) to forbid US airlines from paying such taxes. A battle is brewing, and it appears that the Europeans, despite a recent decision by a court in Europe, will not prevail without severe retaliatory measures.

Unfortunately, the entire EU ETS emission scheme appears to be grounded in poor science. This has been demonstrated through leaks that indicate falsified data and inaccurate methodologies, ignoring results that don't fit.

Whether one does or doesn't believe in the "climate change nee global warming" theory, two things are clear. First, the science behind their theory remains questionable, and second, their taxation, which will take money from airlines that would otherwise purchase new aircraft to reduce high fuel costs will, in the end, be more harmful than productive for environmental improvement.

Ignoring the fundamental problem

Should we improve the environment? Absolutely. But emissions trading schemes that are a tax that adds to general funds do nothing to improve the environment — they simply provide another tax revenue source for politicians and a trading scheme for the financial industry. The EU scheme ignores the fundamental problem and exacerbates, rather than solves, emissions problems. If the intention was to solve emissions problems, the EU taxes would be applied directly to environmental improvement programmes and ensuring that airlines purchase new aircraft.

The best solution is to enable airlines to instead utilise their financial resources to invest in newer aircraft with lower emissions, thereby improving the environment. A new generation of engines for narrow-body aircraft is nearing the market that will result in 15 per cent lower fuel burn and emissions, NOx emissions less than 50 per cent of CAEP/6 standards, as well as significantly lower noise (less than half) for communities near airports.

The answer is new and more efficient aircraft. Every new aircraft that replaces an older one has a 10 to 20 per cent improvement in fuel burn, depending on type. If we could eliminate the oldest aircraft from our fleets, we'd significantly improve the environment. To do that, however, airlines need to keep their profits, rather than pay them in taxes, and invest those funds in new technology.

Within the last year, we've seen orders for more than 1,500 Airbus neo and 500 Boeing Max models. Clearly, the airlines are not standing still and doing nothing, but taking action that is in their own self-interest that also happens to improve their environmental performance. As a group, they should be praised rather than punished with additional taxation.

Recently, more than 50 countries, including the US, Canada, China, Japan and GCC members protested this European tax. Let's hope the EU sees the light. If not, a total stop in flights to and from Europe would be a great way to let the EU know that it is not a global government and cannot dictate its policies, especially ones based on false assumptions.

 

The writer is President and CEO of the Arvai Group.

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