Greenhouse Gas Tax Could Inflate Airfares

From NCPA

Attempting to address concerns regarding global warming and the gradual increase of manmade emissions, the European Union has implemented an emissions trading scheme under which airlines will be forced to pay a carbon tax for emissions over a specific level.  (Australia voted to enact a carbon tax Nov 8). The plan has caused controversy all over the world, with airlines from the United States to China questioning why they should be forced to pay European emissions fees for emissions that are not released in European airspace. Regardless, it does seem clear that the costs of such a program are likely to be passed directly onto consumers, says USA Today.

• The European program caps carbon dioxide emissions at 2006 levels and allows airlines to fly 85 percent of that amount for free in the first year, later dropping to 82 percent.
• The European program could raise round-trip ticket prices from the United States by more than $30 starting next year.
• After the program starts on January 1, U.S. airlines estimate it will cost them $3.1 billion over the next decade.
• The European Union's commissioner for climate action estimates that the additional cost to passengers could range from $2.84 to $17 per ticket, with a ticket from Paris to Beijing costing an additional $10.68.

The program has primarily come under fire because of its international implications, despite the fact that it only has regional approval. The additional costs to the airlines and to consumers will undoubtedly affect rates to other countries that are not part of the European Union, causing many foreign airlines to cite violations of international law. Emphasizing the far-reaching impacts of this policy, some have pointed out that a flight from San Francisco to London would be taxed for its emissions for the entire trip, despite the fact that it is within European airspace for only 9 percent of the trip's duration.

Many have also complained that there is no guarantee that the additional revenue collected from the program will go back to environmental protection efforts. While the funds are to be directed by a general objective that would allocate them towards the environment, the funds will be collected by countries individually and will be left to their discretion, thereby reducing the chance for oversight.

Source: Bart Jansen, "Greenhouse Gas Tax Could Inflate Airfares," USA Today, November 1, 2011.

Related: Australia passes carbon tax laws