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ANALYSIS - Europe targets aviation industry for pollution levy

ANALYSIS - Europe targets aviation industry for pollution levy
LONDON - Europe is moving towards slapping charges on jet fuel, the fastest growing source of greenhouse gas emissions, ending the fuel\'s tax-free status and raising the cost of air travel.
The new levy could add 15 euros ($13.55) to ticket prices within the European Union within three years, hitting no-frills carriers. If implemented, the charge could pave the way for a global tax on the fuel which has been exempt since the second World War to encourage the airline industry. The EU is waiting for a report commissioned last year looking at a range of options from a straight fuel tax to a permits system that penalises polluting airlines. \"There is the political will to do something. The community wants to adopt market-based mechanisms which will yield real environmental benefits,\" EU senior policy adviser Michael Rossell told Reuters from Brussels. \"A study in 1999 showed a tax would put EU carriers at a competitive disadvantage, so we are looking at other measures which member states would be willing to sign up for,\" he said. The proposal must pass several stages before it is approved. Rossel said the charge could be in place by 2005. Aviation causes 3.5 percent of man-made global warming, according to the Inter-Governmental Panel on Climate Change. This could rise to 15 percent by 2050. TAX FREE SINCE 1944 Airline fuel is exempt from tax because of a 1944 agreement to promote the fledgling aviation industry. It has also escaped being included in the Kyoto protocol on greenhouse gases because of difficulties in allocating emissions between countries. Motor fuels on the other hand are taxed heavily and taxes make up 80 percent of the retail price of gasoline in the UK. \"The revenue from a charge on jet fuel could be channelled into research for clean aircraft,\" said Tim Johnson, director of a green lobby group called Aviation Environment Federation. \"At the moment some ticket prices have fallen so low that there may be some artificial demand being created,\" he said, referring to budget carriers which sell tickets for as little as 30 euros return within Europe. Support is growing among governments. The UK said in a recent green paper that the absence of a jet fuel tax was an anomaly. The EU\'s Environment Agency says the fuel is a clear tax target. \"It\'s ludicrous that one of the most luxurious ways of travelling is not taxed,\" the agency\'s head Domingo Jimenez-Beltran said recently. CARBON DIOXIDE The world\'s 16,000 commercial aircraft pump about 600 million tonnes of carbon dioxide into the atmosphere every year and the Inter-Governmental Panel on Climate Change in 1999 predicted a sharp rise in air transport. The study projected jet fuel consumption to triple in 50 years from today\'s 150 million tonnes. Environmental lobbyists say a fuel charge could go into a fund for research into cleaner energy technology. And they say it is time jet fuel was taxed globally. U.S.-Europe routes account for 80 percent of all flights worldwide. \"The wider the geographical scope of the tax, the more emissions you would capture,\" said lobbyist Johnson. But the International Civil Aviation Organisation (ICAO), the UN body governing international air traffic regulations, has so far failed to move on a jet fuel tax. Its approval would be key to an international levy. Many governments will oppose a tax on the basis that it will slow economic growth and hit airline profitability. AIRLINES OPPOSE The International Air Transport Association (IATA) which groups 95 percent of the world\'s airlines says imposing a fuel tax or charge will not help resolve the problem of emissions but will exclude some segments of society from air travel. \"This is a politically simple solution,\" said Keith Carter IATA\'s deputy head for jet fuel. \"It is better to have incentives such as emissions trading than a tax which would just lead to higher ticket prices for consumers.\" Emissions trading is a tool to help countries meet emissions reduction commitments under the Kyoto protocol. Energy efficient firms which cut emissions gain allowances which they can sell. IATA says airlines have already taken steps and fuel efficiency has improved by 17 percent between 1990 and 2000. EU\'s Rossell said a charge was not a foregone conclusion. \"We are also looking at the \'revenue neutral\' concept which means less energy efficient aircraft will pay more and more efficient ones will get a rebate,\" he said. \"This will give airlines an incentive to remove old aircraft sooner than they would have done otherwise.\" Story by Sujata Rao REUTERS NEWS SERVICE
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