There goes the Eurotrip..?

A senior court advisor in the European Court of Justice confirmed this week that the European Union is legally allowed to compel airlines to pay for their greenhouse commissions when landing or taking off from European airports. This announcement is an important step in an ongoing battle between the international airline industry and European regulators, and comes at a time when regulators are pushing to include airline emissions in its Emissions Trading System.

The opinion is not yet legally binding, but a final ruling is expected in the coming months.  All carriers, both European and otherwise, would have to be involved in the system to prevent “leakage” or competitive disadvantages to European carriers – provoking strong reactions from non-European carriers. Analysts caution against a brewing trade war, sparked by incidents such as the blocking of an aircraft purchase by Hong Kong Airlines from France’s Airbus last June. Critics from the industry retort that the money will be used to subsidize cash-strapped European governments rather than for climate protection. Plus there is the technical difficulty of measuring the carbon footprint of flying.

Be that as it may, it is a first step in capturing the “true” cost of airline travel. The EU estimates that the price of a one-way trans-Atlantic air ticket would probably rise by about $ 2.7 to $ 16, but industry estimates put the cost higher, and U.S. carriers project they will end up spending $ 3.1 billion on carbon permits by 2020. The rise in operating costs in unlikely to be transferred to consumers at this time, effectively creating a tax on the airline industry.

According to ratings agency Fitch, United Continental, Delta, and American Airlines would feel the pinch, but smaller European budget carriers like Ryanair (which calls itself “Europe’s Greenest Airline”)  and Easyjet would face a disproportionate impact. According to Standard and Poor’s report, airlines flying short-haul routes are less fuel efficient than long-haul carriers because of more frequent takeoffs.  Ian Pearson, Britain’s environment minister, has branded the low-cost flyer as “the irresponsible face of capitalism.” It appears highly likely now that the ruling will be in favor of regulation, potentially provoking a dangerous trade war. Watch this space, dangerous capitalists and Eurotrippers.

 

 

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