December 19, 2011 11:49 pm

US threatens EU over green levy on airlines

The US has threatened to take retaliatory action against the European Union unless Brussels drops its plan imminently to start charging any airline flying into the bloc for its carbon pollution.

In a sharp escalation of tensions over Brussels’ move to bring aviation into its emissions trading system from January 1, Hilary Clinton, US Secretary of State, has written to her European Commission counterpart, Catherine Ashton, and other top commissioners, to “strongly urge” the EU to halt or suspend its plan.

“Absent such willingness on the part of the EU, we will be compelled to take appropriate action,” Mrs Clinton said. The EU had become “increasingly isolated” on the issue, she said.

Her letter, dated December 16 and seen by the Financial Times, lists 42 other countries, including China, Japan, Russia and Brazil, that she said were opposed to what amounts to Brussels’ boldest move yet to force the rest of the world to comply with its ambitious environmental policies.

European airlines said the letter showed they could get caught up in a global trade war, on top of having to pay for their carbon emissions under the new measure.

“We now face a situation, as evidenced by Secretary Clinton’s letter, where urgent measures are required by the European Union in order to defuse a potential trade conflict,” said Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines.

Europe’s largest carrier by revenue, Lufthansa, expressed fears of “retaliatory measures” and said Brussels should instead pursue a global solution to airline pollution through the International Civil Aviation Organization, the UN agency.

The European scheme obliges companies to pay for permits, each equal to one tonne of carbon dioxide, to cover their annual emissions. Companies whose emissions exceed certain levels can buy permits from those that pollute less.

The EU climate commissioner, Connie Hedegaard, who was one of the commissioners to whom Mrs Clinton wrote, made it clear Brussels had no intention of backing down, and added it was ICAO’s failure to act that had led Europe to move in the first place.

“We know the US administration’s views on this,” she told the FT, referring to comments that more junior US officials made in EU meetings earlier this year. “We know their views. They know our views.”

Mrs Clinton’s letter comes on the eve of a European Court of Justice decision due on Wednesday in a case that US airlines brought to try to halt Brussels’ move. A preliminary decision in October cast aside most of the US carriers’ arguments, in a setback for the airlines. In general, such opinions are endorsed by the full court when it takes a final decision.

If the full court also rejects the US airlines’ arguments, that leaves a measure both Republicans and Democrats in the US House of Representatives have approved that would make it illegal for US carriers to comply with the EU scheme.

The International Air Transport Association, the airlines’ main representative body, reiterated its call this month for the EU to drop its plan to include carriers within the bloc’s emissions trading scheme in favour of an ICAO-brokered solution.

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