Why the EU Airline Tax Won't Fly
China has already cancelled orders for 35 European Airbus A330 jets, and is threatening to cancel on 10 more. India has just banned its airlines from submitting any carbon emission data by the EU’s March 31 deadline. In February, the two Asian giants, along with 21 other countries including the United States, signed up to the Moscow Declaration, a strategic blueprint for global trade ‘war’. It has a single aim: to make sure the EU’s Airline Tax never gets off the ground.
While the EU’s unelected Climate Czar Connie Hedegaard bullishly dismisses threats from the Moscow group of nations as “hypothetical” – exactly how is a cancelled order for planes “hypothetical” Connie? – actual elected leaders in European capitals are unlikely to remain as sanguine. Well before the first payment Airline Tax invoices are mailed in 2013 it becomes clear just how economically damaging a global trade war would be to European national economies.
If anything, the EU’s unilateral imposition of an anti-carbon emission airline tax on non-EU national airlines pointedly demonstrates the weakness at the heart of the European Union project: federal ambitions v national self-interest. Take the key role of Europe’s largest economy. German taxpayers have recently pulled the plug on their commitment to constantly bail out the profligate public spending of Europe’s southern economies within the 17-state Eurozone. But then German national self-interest consistently undermines key EU policies. And why shouldn’t it? After all, the EU elite aren’t picking up the tab for them, national taxpayers are. Germany’s blatant undermining of the EU’s much ballyhooed white elephant, the Nabucco pipeline project, is just one example of this.
Designed to import natural gas in a pipeline that circumvents Russian soil, Nabucco is the EU’s great ‘pipe’ hope to help it diversify away from the stranglehold of Russian gas supplies. However, the pipeline still lacks the small matter of contracted gas supplies. Moreover, it has lately been outflanked by the opening in late 2011 of the Russo-German built Nord Stream, a company chaired by former German Chancellor Gerhard Schroeder and supported by a network of German politicians and industrialists. While Brussels sought diversification, backing Nord Stream against Nabucco is just one example of how Germany has been busy building up its own bilateral ‘special relationship’ with its largest trading partner, Russia. When it comes to national self-interest, energy security especially just cannot be left to the vagueries of lofty EU-style politicking – as with the ill-thought through ramifications of a unilaterally imposed airline tax.
Do we seriously expect Germany to jeopardize its trade relations with Russia? Would Berlin and others really risk losing Siberia over-fly rights if Russian is forced to carry out its threat to hand them to Japan, China and other Asian nations? And it’s not as if Germany and other EU states would be enrolling in a global air and trade war to any productive end. The purpose of the EU Directive more broadly is as a key strategy in the war against CO2, a war the EU-ETS (European Trading Scheme) is demonstrably far from winning.
According to a recent French bank report, the European Commission will release its preliminary data on emissions for 2011 on April 2, with final data being published in May. The report anticipates that Europe’s emissions “should have been stable in 2011″. But having risen by 3.2 percent the previous year, a stabilizing of emissions hardly justifies the massive cost to industry that subscribing to the EU-ETS inflicts. In the UK, for instance, the heavy cost of a range of green taxes designed to help the nation meet its EU imposed carbon targets has not only seen CO2 emissions fail to fall but, according to new figures, the UK’s carbon footprint has actually risen by 20 percent. No surprise then that the UK is considering dumping its carbon trading scheme altogether.
And worse is to come for the EU’s green ambitions.
Germany and countless other European capitals are already axing expensive wind and solar subsidy regimes. Without the oxygen of government cash, companies and projects will find maintaining costly renewable energy projects a seriously difficult proposition. They will require private investment, but much of that is already funnelling into new shale gas and deepwater oil exploration projects.
For obvious reasons, no EU state took part in the February meeting in Moscow. But the basket of prospective retaliatory air, and prospective trade, measures cited in the Declaration will target individual European economies. The measures include:
- Prohibiting national airlines from participating in the EU-ETS
- Reviewing bilateral air service agreements, including Open Skies, with individual EU states
- Suspending current and future negotiations to enhance operating rights for EU airlines
- Imposing additional levies/charges on EU carriers
And that’s just for starters. The Moscow Declaration leaves the way open for “any other actions/measures”. The EU is currently consulting on extending the ETS to shipping; given the trade clout of the already galvanized anti-airline tax alliance, good luck with that.
Divide and rule is clearly the preferred strategy of the Moscow Declaration signatories; a strategy aimed at driving a wedge between hard-nosed national self-interest and ideological federalist ambition.
The message to the EU is pointed and clear: back off, we mean business.