Airlines balk at EU carbon tax plan

North American airlines are joining forces to fight an EU plan that would see a carbon tax applied to all flights that land in Europe.

The Air Transport Association of America, which represents the dominant U.S. air carriers, filed suit inthe European Court of Justice inLuxembourg on Tuesdayagainst new rules, set to come into effect in January, that will see a carboncap-and-trade systemapplied to all flights coming in and out of Europe.

Though ATAA is leading the charge, the National Airlines Council of Canada (which speaks on behalf of Air Canada, WestJet, Air Transat, Jazz and others) is lending its support to the lawsuit.

Starting in January, the European Union is demanding that all carriers that take off or land in EU territory emit no more than a set amount of carbon dioxide. The carriers can buy extra credits from each other if they exceed that limit or sell credits if they emit less.

The cap for 2012 is set at 212.9 million tons of CO2 about three per cent less than the average the airlines emitted annually between 2004 and 2006. The following year, the cap will drop another two per cent and stay there until 2020.

The idea is to encourage airlines to become more fuel efficient. Air travel is currently responsible for about three per cent of carbon emissions every year, but that share is increasing as the developing world takes to the skies.

"We don't believe this is an extraterritorial measure, because when an aircraft touches down or departs from a European airport, we have the right to legislate here in Europe," EU spokesman Isaac Valero-Ladron said.

The EU said the impact will be minimal perhaps a few euros per person on a transatlantic flight. But the industry counters it will cost them up to $1 billiona year and lead to higher fares for customers and fewer routes.

They also say the plan is in violation of the Open Skies agreement, as the EU only has the power to regulate airlines that operate exclusively inside the EU.

China has already threatened to review its contracts for the purchase of Airbus planes if the emissions caps are applied to Chinese airlines. In contrast, Russia is working with the EU to implement equivalent measures demanded by the bloc.

A ruling is expected sometime before 2012.