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Airlines Fight Pollution Fee In EU Plan

August 11, 2005

Source: Wall Street Journal
Author: Daniel Michaels

Airlines and their passengers are beset by soaring costs for fuel, insurance and security. Now they may also face bills for polluting.

Next month, the European Union aims to present its strategy for making airlines pay a levy for the carbon dioxide their planes emit. The plan, if approved, effects of airplane emissionscould hit consumers in the wallet by adding as much as $100 to the price of a long-haul airline ticket from Europe, by some calculations, and smaller amounts for flights within the EU.

More troubling for the airline industry, the EU could spark a global fight if it follows through on a proposal to regulate non-EU airlines in its plan. That's because the U.S. government and the United Nations' aviation regulator say the EU has authority only to force airlines from the 25-country bloc to pay for emissions. The issue is shaping up as one of the next big battles in the aviation industry.

Carriers say politicians risk crimping people's ability to afford flying by imposing big bills for polluting. Environmental activists counter that ballooning air travel is itself the problem because aircraft, operating at high altitude, may have a disproportionately strong impact on the global climate. Some environmental groups even say air travel is too cheap -- and they advocate cutting traffic through hefty taxes.

The issue has gained prominence since the Kyoto protocol on global warming came into force in February. Aviation isn't covered by the treaty, and environmental activists, especially in Europe, say airlines shouldn't get that special treatment.

The EU wants to make airlines pay to reduce or offset the carbon dioxide that aircraft produce from burning jet fuel as soon as 2008. "Our goal is for airlines to take responsibility for their CO SUPERSCRIPT(2) emissions," said Barbara Helfferich, spokeswoman for EU Environment Commissioner Stavros Dimas.

EU officials favor adding airlines to the so-called emissions-trading scheme the EU started on Jan. 1 to meet its Kyoto obligations. Under the system, polluters in a number of industries -- including oil refining, power generation and steel manufacturing -- are granted the right to emit a set amount of carbon dioxide. Beyond that, they must buy emissions credits that trade on an open market and which are partially linked to projects that reduce CO SUPERSCRIPT(2) emissions around the world. The levy isn't a tax because the money wouldn't go to general tax coffers. But the EU also is considering a variety of options for airlines, including taxes or other types of charges.

Whatever shape the emissions levies take, airline tickets are likely to be one of the first places consumers feel the cost of environmental policies in Europe, the region that is taking the most forceful steps to try to tackle global warming. The hit will be especially evident if airlines itemize the emissions cost on tickets, as they already do with other taxes and fees. Consumers' reaction could shape future policies on emissions payments for cars and other nonindustrial pollution around the world.

The expense could be huge to the global airline industry, which officials predict will lose around $9 billion this year due mainly to stratospheric fuel prices. A study by the U.N.'s International Civil Aviation Organization estimates that a system to charge carriers world-wide for the greenhouse gases they produce could cost $17 billion to $60 billion annually, depending how tight the standards are. It isn't clear how much of the cost airlines would pass along to consumers.

Swiss environmental group myclimate estimates that each passenger's slice of an airline's bill for emissions credits would boost the price of a round-trip ticket between London and Paris by around $20, and between London and Los Angeles by almost $100. The U.S., which hasn't signed the Kyoto protocol, has opposed pollution charges for airlines. At an ICAO meeting last year, the U.S. succeeded in postponing discussion of global measures until at least 2007.

But the EU hopes to move sooner. As a result, European carriers fear being left at a competitive disadvantage and are trying to influence the EU plans. Most of the British aviation industry in June teamed up to form a lobbying group called Sustainable Aviation that committed to significant emissions cuts by 2020. The Association of European Airlines and five other international aviation trade groups on July 18 published an emissions "containment policy," listing steps being taken to make the sector greener. Both British Airways and Scandinavian Airlines System are participating in experimental programs for trading pollution rights.

One EU proposal is to treat all carriers equally by imposing a charge on each flight taking off in the EU. EU officials say this is legal because of its evenhandedness. But an ICAO spokesman in Montreal said the move would be illegal. And U.S. industry officials said they would fight EU pollution levies and instead look to ICAO, which establishes global standards for aviation.

"The ICAO work is critical, because that's where world-wide policy is set," said Nancy Young, an attorney at the Air Transport Association, a trade group in Washington.

Pollution concerns have long dogged aviation. Carriers, plane makers and engine suppliers have taken great strides in recent decades to squelch the deafening roar and thick smoke that jets once produced. In the past few years, airlines have replaced thousands of old fuel-guzzling jetliners with new, cleaner-operating models. Today, the surging price of jet fuel is prompting carriers to fly only the latest planes, and to keep engines in top condition, both of which cut emissions.

But air traffic is increasing faster than aircraft fuel-efficiency. So although planes are cleaner than a few years ago, the overall pollution level from airlines is growing. Jetliners currently account for less than 4% of global emissions, but the volume of carbon dioxide and other pollutants put out by aircraft engines is rising quickly.

The fact that airplanes pollute high in the atmosphere is another important factor. Water vapor, nitrogen compounds and soot emitted by jets are relatively harmless at ground level, but in the sky they can contribute to cloud formation and other phenomena that affect weather patterns. The United Nations' Intergovernmental Panel on Climate Change in 1999 estimated that aircraft in-flight emissions have roughly three times the environmental impact as the same substances produced on the ground. But scientists are still trying to understand the chemistry -- and some suggest aviation could actually have a cooling effect.

Some environmental advocates say European airlines' efforts to influence regulations are an attempt to dodge the cost of aircraft pollution. Richard Dyer, aviation campaigner at the British office of Friends of the Earth, says he advocates higher taxes. Airlines world-wide are exempt from paying most taxes on jet fuel, the result of a 1944 international treaty aimed at promoting air travel after World War II. Conservationists argue that fewer people would fly if airlines paid the same fuel levies as users in other industries.

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