Sept. 29 (Bloomberg) -- India is working with more than 30 nations to draw up a strategy to counter the European Union’s plan to impose emission charges on airlines flying into the region starting next year.
“How can they dictate terms to us and why should we accept it?” Vayalar Ravi, India’s civil aviation minister, said in an interview in New Delhi yesterday before a meeting of the International Civil Aviation Organization on the EU’s plan. “This is their fantasy.”
Measures by the 27-nation bloc to impose carbon curbs on flights to and from the region have sparked protests from China’s airline association and carriers including American Airlines and Continental Airlines. The EU plans “contravene” international law and “is an attack on sovereignty,” the International Air Transport Association said this week.
More than 30 members of the International Civil Aviation Organization started their meeting on the EU’s emission trading system in India’s capital today. The Montreal-based ICAO has 190 member states, including the U.S. and China, according to its website. India’s aviation ministry is hosting the two-day meeting, Ravi said, without naming the countries that are participating.
‘Tit-for-Tat Taxes’
“By making the scheme applicable to non-EU airlines, there is a feeling that the European Union is overstepping its authority,” said Binit Somaia, a Sydney-based director at industry adviser CAPA Centre for Aviation. “Retaliation could take the form of tit-for-tat taxes, restrictions on traffic rights for European carriers and could even impact European aircraft manufacturers.”
The EU decided in 2008 that aviation should become a part of its cap-and-trade carbon program after airline discharges in Europe doubled over two decades. Emissions from international aviation now account for 2 percent to 3 percent of global greenhouse gas discharges, according to the EU.
Starting in January 2012, airlines flying into the EU will have to buy carbon permits if they exceed the emission norms set by the bloc. The costs of meeting emissions targets may raise airline fares for a transatlantic flight by between two euros ($2.72) and 12 euros, according to Jos Delbeke, the European Commission director-general for climate.
Air India Ltd., Jet Airways (India) Ltd. and Kingfisher Airlines Ltd., the three carriers flying to Europe from India, posted losses in the year ended March 31 as they battled high fuel costs that account for about 40 percent of an airline’s operational expenses.
Power Stations, Factories
Airlines will be joining Europe’s power stations and factories in the region’s emissions-trading system that now covers more than 11,000 utilities and manufacturers. Under the legislation, 85 percent of the emission allowances making up the airline-industry cap would be allocated for free, and the balance would be auctioned in 2012.
The European Commission set the benchmarks this week to calculate the distribution of free carbon-dioxide permits among international airlines from next year. The regulator set a level of 0.6422 carbon allowances per 1,000 ton-kilometers for the eight years through 2020. Airlines will receive 0.6797 carbon allowances per 1,000 ton-kilometers in 2012.
The EU’s carbon curbs will add $1.2 billion of costs to airlines in 2012, IATA’s Chief Executive Officer Tony Tyler said in a Sept. 27 statement on the group’s website. Carriers are forecast to make a combined profit of $4.9 billion next year, according to IATA.
The China Air Transport Association said in June that the EU’s plan is “unreasonable and illegal.” The nation’s big three state-controlled carriers are members of the group.
“The permit is a penalty on all foreign carriers going to Europe,” Minister Ravi said. “The aviation industry is growing in our country, and we can’t be penalized for that.”
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