Isra-Mart srl: India to oppose EU's Emission Trading System for airlines

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The Indian government will oppose the European Union's proposal to make airlines buy carbon credits for using its airspace, on the grounds that it is unilateral and unfair to carriers from developing countries.

The EU's proposal to cap planet-warming gases under its Emission Trading System (ETS) makes it mandatory for airlines to buy carbon credits equivalent to the carbon di-oxide emitted by their aircraft while flying over the region. This is likely to force airlines to pass on the cost to passengers. According to a report by Manisha Singhal and Anindya Upadhyay in The Economic Times, India also says the arrangement would allow European carriers to manipulate the taxation system after it comes into force from January 1, 2012.

"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," a top government official said. India will take up the issue with the authority concerned in the European Union.

The aviation industry uses 70 billion gallons of fuel, or 230 billion litres, every year. The International Air Transport Association (IATA) has pegged yearly carbon dioxide emission from commercial aircraft at 649 million tonnes, which is estimated to rise to 900 million tonnes by 2020. European carrier, Lufthansa, last month joined the list of airlines that have tested flights using bio-fuels.

The EU says the tax is valid and plans to impose sanctions against airlines that do not comply. But opposition to the ETS appears widespread. While American carriers have decided to go legal against the plan, armed with a Bill to stay out of the Emission Trading System, China has threatened to cancel over USD 3.8 billion in aircraft orders from European manufacturer Airbus if it is not exempted. Some big Gulf carriers, too, have opposed the move.

Indian carriers, already feeling the heat from foreign airlines handling almost 70 per cent of traffic from India, say the issue is a political 'hot potato' and the government must back them in their protest. "We have met all deadlines, but have done so under protest. We hope the government will take it forward with the EU," said a top official with Jet Airways. Jet, which earns about 57.5 per cent of its revenues from international operations, is directly in the line of fire. It operates about 30 flights a week from India to Europe and London.

Experts say the EU's move will make passengers cough up more money. "ETA is almost reality today. And we feel airlines will have to comply, and by doing so, their cost per route will definitely go up and they will have no choice but to pass on that burden to passengers," said Kapil Kaul, CEO, Centre for Asia Pacific Aviation - India and Middle East.