Airline Carbon Tax Galvanizes Opposition from Subcontinent
No taxation without representation. India throws aviation biofuels overboard and says ‘don’t tread on me.’
Aviation biofuels, which are poised to flow into the EU market under an anticipated carbon tax on airline emissions, may have lost support from the Subcontinent. This week, the Indian government announced that it will challenge the EU’s proposal to make airlines buy carbon credits for using its airspace.
Arguing that the EU’s proposal to regulate emissions from the airline industry under Aviation Amendments to its Emission Trading Scheme (ETS) is unilateral and unfair on carriers from developing countries, the Indian government contends that the regulation would allow European carriers to manipulate the taxation system after it comes into force January 1 next year.
The global aviation industry currently uses around 70 billion gallons of fuel every year. Although only representing 2 percent of greenhouse gas emissions, the industry is committed to stabilizing emissions with carbon-neutral growth by 2020 and has set a target of reducing emissions by 50% by 2050. Biofuels are a key component of their strategy.
Carbon regulations, like those that have been proposed under the EU’s ETS Amendments are expected to have at least a marginal impact on the economics of aviation biofuels in the short term, assuming the Amendments survive legal challenges from the Indian government as well as the United States and IATA (see Battle Over Emissions and the Rise of Aviation Biofuels). China has threatened to cancel over $3.8 billion in aircraft orders from European manufacturer Airbus if it is not exempted. Some big Gulf carriers, too, have opposed the move.
The EU maintains that the tax is valid and plans to impose sanctions against airlines that do not comply.
A top government official from India disagrees:
India is protesting the imposition of this system because no ETS measure can be imposed without bilateral negotiations. Tomorrow, they (EU) may impose another tax and nobody would be able to do anything.
India is also concerned that the European Union’s move will encourage a black market for carbon credits. With certification cleared for Bio-SPK aviation biofuels, international carriers will be watching the brewing battle over EU’s carbon tax closely.