Editorial: EU ETS won’t fly, but nor will a trade war

To be clear, the European Union Emissions Trading Scheme (EU ETS) is a foolhardy plan, even by the general standard of aviation taxation schemes.

How the European Commission (EC) can honestly believe that nations like China, India and Russia will cave in to such a blatantly extra-territorial imposition, wielded without even the pretense of having gained international consensus, is extraordinary. And even if it quietly acknowledges to itself that the US is unlikely to back down by the January ETS deadline, then the EC is also misguided if it thinks bringing America to this who-blinks-first brinkmanship is a good idea. Rather than admire the EC for standing up to US, such a reckless act is more likely to unite the rest of the world behind America and against Europe. How often do we see that happening these days?

But let’s also be clear on something else. A trade war is in no-one’s interests, least of all that of the airline industry. A global tit-for-tat spat is the last thing the world’s— most especially Europe’s—fragile economy needs now. And the one consistent truism in the aviation industry is that what’s bad for the economy is worse for the airlines.

The more important point, however, is that neither the outraged mud-slinging (or “rock throwing” as IATA DG Tony Tyler described it), nor a trade war will solve the problem. Difficult as it is, therefore, the public outcry needs to quiet down and leaders across the industry must get together behind closed doors for some grown-up talk about reaching a grown-up plan. Then everyone must stick to that plan and present it with one global voice via ICAO.

For that to happen, certain requirements will be necessary. First, the new plan cannot be something that completely shreds the EU scheme. Public humiliation can be no part of the way forward. So the rest of the world must acknowledge and take into account that the principle of what Europe is doing—if not the method—is correct. A responsible aviation industry must pay its fair share of emissions taxes. Any new proposal must make clear that a market-based, fair-to-all system, globally enforced but respectful of sovereign rights, is indeed overdue and that airlines are willing to address its implementation as a matter of urgency.

Second, ICAO, which is the only appropriate body for such a scheme to be enacted, must find a way to fast-track any agreed-upon solution. The longer a void exists for smooth passage of an internationally agreed emissions tax, the easier it is for someone to come in and impose a unilateral solution: the EC being a case in point, but the more this debacle drags on, the more likely it becomes that the US will be the next in line with its own scheme. Does anyone think a US solution will be any more palatable to the international community than a European one?

And finally, the EC must recognize—if only internally—that EU ETS won’t fly. With the current state of the European economy, there is huge mistrust about the true intent of this tax. Even if it’s not true, many suspect that the purpose has nothing to do with the environment and everything to do with finding coppers for Europe’s badly depleted coffers.

None of this will be easy. But the alternatives make the effort all the more critical.