IATA warns of trade war over EU carbon tax on aviation

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Global airlines body IATA on Tuesday warned of a trade war between Europe and many nations like India, Russia, China and the US over imposition of carbon tax on all air travel over the sky of the western continent, which is seen as holding a ‘pistol to the head’ of other countries.

"The last thing IATA wants is a trade war or a tit-for-tat activity. We are on the brink of something like that happening (between EU and over 30 other countries). It is an extremely charged situation now," Paul Steele, IATA's Director Aviation Environment, said.

Over 30 countries gathered in Delhi and later in Moscow a few months ago and adopted a declaration opposing the European Union's decision to include air travel in their Emission Trading System (EU-ETS) and decided to take retaliatory measures.

The EU move entails high taxation on all aircraft movement on the European skies, including overflights. Steele said the EU-ETS was ‘no longer an aviation or climate issue, but a major political issue now. It is no longer an industry cost issue but an issue concerning sovereignty of nations.’

Observing that the battle was between the EU and the ‘coalition of the unwilling’ countries, he said the International Air Transport Association (IATA) was working with the UN-body International Civil Aviation Organisation (ICAO) to find a way out of the impasse.

As retaliatory measures against the ‘unilateral’ EU move, countries like India, China, Russia and the United States were considering ‘slowing down buying of aircraft from European aircraft manufacturers or limiting overflights.’

"We want to avoid that situation from arising. It depends on how the governments react. But all parties involved in this, see a potential solution emerging at the ICAO. EU is still seen as holding 'a pistol to the head' of other nations," Steele said. The IATA official said his organisation's focus would be to back the ICAO process by rallying support amongst states opposing the EU.

Both sides should adopt a constructive approach, he said, adding that during the negotiations on resolving the ETS issue, inputs from the aviation industry have to be taken. Maintaining that some market-based proposals have already been suggested to resolve the impasse, Steele said the ICAO has recently set up an ad hoc group of experts to help resolve the matter.

The experts include those from India, Australia, Brazil, EU, US, UAE, Japan and Switzerland. A meeting of the ICAO Council is slated later this month in which discussions would be held on ways to arrive at an agreement on the EU-ETS imbroglio by this year end, Steele said.