U.S. Takes Harder Line Against E.U. Carbon Trading Scheme That Taxes Airlines Emissions While In E.U. Airspace

Washington, D.C. -

The Senate Commerce Committee has called the European plan to deal with carbon emission "unworkable" by both democrats and republicans and was supported by Transportation Secretary Ray LaHood who described the E.U. effort as a "Lone Ranger" approach for unilaterally imposing the measure in January.

The Obama administration said it would strongly oppose the measure. Both the panel's Chairman, (D) Jay Rockefeller, and the ranking republican, (R) Kay Bailey Hutchison, have said they are in agreement that "their [the E.U.] unilateral action is likely not sustainable by international law."

Many think the E.U. carbon trading scheme could cause a global trade war, as the U.S., India, Russia, China, Brazil, Canada, Mexico, along with several other countries have called on the E.U. to scrape the plan. Critics argue that its not even about emissions, that it is just another tax to raise cash. So far about 30 nations have joined the Delhi Declaration opposing the E.U. plan including the ones listed above.

China has banned Chinese based airlines from purchasing Airbus aircraft because they are designed and built in Europe, and India is considering a similar measure. Both have already banned airlines based in their countries from paying the tax. Several other countries are in the process of implementing retaliatory actions as well.

The U.S. has filed a legal challenge to the plan with the World Trade Organization, WTO, calling the plan illegal under international laws. Additionally, U.S. officials have said privately they would consider a tax or tariff on European airlines coming to the U.S. if the E.U. carbon tax is upheld.

Airbus is thought to have lost several deals to Boeing over the dispute including a deal in which Boeing bought 5 Airbus A330's to a Chinese airlines in order to sell 20 Boeing 777's.

E.U. officials have said they are open to modifying the law which is already in effect but that no one has come up with a realistic alternative. Denmark's Climate Minister Martin Lidegaard has said that short of a reasonable alternative, the tax will remain and airlines operating in Europe must pay it or be fined and eventually banned from flying into European air space. What remains unclear is what a "reasonable" alternative was.

A plan once put forward would have China agree to stricter environmental pollution laws in exchange for a waiver to the E.U. plan, but that has not satisfied other countries such as India, Russia or the United States.

Airbus along with several major European based airlines including British Airways, Air France, KLM, Lufthansa, Virgin Atlantic, Iberia, Air Berlin and others wrote a joint letter to the leaders of Britain, France Germany and to the European parliament in Brussels demanding that the plan be scrapped arguing it will hurt European business and could trigger a trade war.

The plan called for airlines that operate in European airspace to pay a tax for going over their allotted amount of carbon emissions or trade them with other airlines in some cases.

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