A carbon tax on U.S. airline passengers.

Oct 27, 2011
WSJ

Who says bipartisanship is kaput in Washington, D.C.? Last week the House passed a bill that would bar U.S. airlines from complying with a European Union directive that requires all airliners flying to Europe to buy carbon-emissions permits. Sponsored by Transportation Chairman John Mica of Florida, the bill sailed through on a voice vote with the support of nine Democratic co-sponsors. Even the White House is on board.

The European rule, which will go into force in January, takes the extraordinary step of requiring airlines to cover all of their flights with carbon-emission permits, even if most of the journey—say, the 3,963 miles from Chicago to London—hardly intrudes on European airspace. “It would be like the U.S. trying to charge British Airways for carrying plastic cartons because it impacts the environment,” notes Vaughn Cordle of Washington-based AirlineForecasts. Airlines that refuse will be subject to a fine of €100 per ton of CO2 that exceeds the EU’s limits and could be banned from operating in the EU.

The House bill takes aim at the EU’s unilateralism, noting that the rule “undermines ongoing efforts at the International Civil Aviation Organization to develop a unified, worldwide approach” to air emissions. U.S. airlines may soon have to choose between violating European or American law.

For passengers on trans-Atlantic flights, the EU directive will mean one more ticket surcharge—about €12 between Brussels and New York. For airlines, the stakes are greater. European carriers have been explicit in supporting the directive as a way of imposing equal costs on their foreign competitors.

The industry will face additional costs of between one and two billion euros next year depending on the price of the carbon permits, which isn’t exactly pocket change in a business with ultra-tight margins. Mr. Cordle’s analysis of a cap-and-trade scheme once mooted by the Obama Administration found that it would add 5% to airfares, cause a 3% decline in demand for tickets, and result in a 3% drop in air-industry employment, not counting the multiplier effects on the wider economy.

The EU says its directive demonstrates its willingness to take a stand against global warming, never mind that airline CO2 accounts for only about 3% of industrial emissions globally. The likelier motive is that the EU would like the money and won’t let quibbles over sovereignty or efficacy stand in its way.

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