I have said it before - and I say it again: The European Union is going to be the big loser in a forthcoming trade war about the EU´s (incredibly stupid) carbon tax on foreign airlines. Now we hear that the Indian government is planning tough countermeasures:
The trade battle with the European Union over the latter's unilateral decision to impose carbon tax on Indian airlines flying into or via the EU could turn into a full scale war with the Cabinet to soon consider a proposal for counter-measures against EU including reducing the number of flights and breaking existing bilateral agreements.
The proposal, mooted by the civil aviation ministry, seeks the Cabinet's permission to impose various sanctions against EU airlines if the Indian aviation industry is either charged a carbon tax or penalized for not adhering to their taxation regime. The counter-measures recommended in the proposal include cancellning EU flights to India as well as cancelling "horizontal agreements".
The move comes after the government told the Indian aviation sector not to provide data the EU had asked for as part of this new carbon tax regime. The tax itself is to be imposed from next year but the EU has sought data from all flights landing in or transiting via European airspace for calculating the taxes which some estimates suggest could add up to $1.5 billion per annum.
The decision to go for a Cabinet clearance comes after a group of 26 countries including China, US, Russia, Brazil and India jointly agreed to a bouquet of retaliatory measures against EU in February 2012. It was decided that 'like-minded' countries would pick from the menu of options to counter EU's unilateral move if things came to a head.
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It is quite obvious that the European Union - which is in the middle of a serious economic and political crisis - will have to abandon its unilateral carbon tax. In Brussels the behind-the-scenes search for a face saving retreat is now intensifying. The fact that EU´s previously so aggresive "climate queen" Connie Hedegaard has recently toned down her language considerably, is another sign of what is coming.
Fabrice Brégier, CEO of Airbus has offered one possible solution:
“Solutions like applying the [EU emissions trading scheme] first to European [airspace], giving a fair chance to ICAO to come up with a negotiated international solution within the next 18 months and then extending it according to the recommendations of ICAO ... would be, for me, one possible good solution.”
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