Sunday, February 26, 2012

EU ETS At a Crossroads

The rhetoric has subsided and the EU have softened their stance and agreed to a discussion of the Carbon Tax within an ICAO framework. However, the EU still insisted that airlines that do not participate and pay up may face a ban into operating into Europe. At least we are all moving in the right direction.

The EU's position is based on the fact that climate change and the environment have been the subject of a lot of discussions with no actions taken. So the EU decided to take this unilateral action to force a change. Well it kind of worked.

The whole idea behind the ETS it is to force airlines to get rid of their older aircraft and purchase newer technology aircraft which are more efficient and more ecofriendly. MENA and the GCC airlines operate on the whole some of the newest and most advanced aircraft, but under the ETS they still have to pay the tax as the rules tighten with time; after all technology does not evolve in terms of months but rather years and sometimes decades. Airlines have started adding surcharges to the tickets to provision for the payments under ETS. At this time, Etihad added $3 to their tickets to Europe and others will follow soon. A $3 increase to a ticket to Europe is not going to stop people from travelling. However, the tax will dampen the expansion of airlines as they balance fares against additional payments under ETS, which looks somewhat protectionist.

What is really annoying as well as disturbing, that after all this rhetoric about carbon emissions and the airlines having to pay their fair share to offset the effect on the environment. None of that money has to go
towards improving aviation infrastructure or research to improve technology or even projects that improve the environment. Europe will still face the same flow control problems and the same shortage of runways facing the same delays that will keep aircraft unnecessarily burning fuel in the air and on the ground, producing more carbon emissions. The collected monies will go to the general budgets and probably be used to offset deficits or support popular programs that otherwise may  have to be curtailed.

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