South Africa puts a finishing touch on its own carbon Taxes as Airlines adjust to the EU ETS

South Africa is moving ahead with its own plans to introduce carbon taxes later in the year, a situation which will complicate matters and cut into the profits of the country's airlines, particularly South African Airways which will be forced to pay double carbon taxes now that it has to face Europe's unilateral Emissions Trading Systems.

The European Union has indicated that it will not back down with its plans to include non-EU airlines in its Emissions Trading Scheme (ETS). Most airlines have indicated that they will comply with the EU ETS, which came into effect on January 1st 2012. Airlines flying in and out of the European Union will be forced to purchase carbon credits to offset the carbon emissions they produce but the carriers are expected to pass most if not all of these charges to consumers, thus making air travel to Europe more expensive. Threats of boycott by some American and Chinese airlines will not materialize as the EU has threatened tough countermeasures for non compliance by airlines. There are also talk that this could spark a trade war as Chinese, Russian and even US government might impose retaliatory carbon taxes on EU airlines flying into those destinations.

Green Aviation: IATA  favours a global framework for handling aviation emissions under the leadership of UN's ICAO, but Europe, frustrated by the slow pace of deliberations , has instituted its own Emissions Trading System  that has infuriated many governments and industry stakeholders.

Under the Kyoto protocol, the United Nations’ International Civil Aviation Organization, ICAO was given the responsibility to manage the aviation industry's emissions. Many governments have proposed moving forward with this global framework of an emissions trading system that incorporates aviation under the leadership of ICAO but the EU has resolved to unilaterally move ahead with its own ETS scheme, a move that has infuriated many governments and industry stakeholders.

Green Airlines: Several African and global airlines have instituted "green programs" but they are a drop in the ocean. There is a need for a consensus based global framework for handling emissions by airlines.

What this disjointed ETS means is that global airlines flying into Europe will have to pay the EU fees to offset their carbon footprints in Europe while EU airlines do not pay any fees for their carbon footprints when flying to global destinations, a situation that naturally creates an imbalance. A scenario might in the future arise where every country or trading bloc will impose their own set of ETS systems which will lead to increased carbon offset fees as airlines will have to pay double carbon taxes to every country they fly to unless the system is harmonized under a global framework. Of course these fees will be passed over to passengers making air travel even more costly. That situation might arise soon as South Africa finalizes its carbon tax plan that includes the aviation industry.

South Africa's carbon offset plan illustrates the situation that many airlines will face in the future if every country or trade bloc institute their own set of emission trading systems and move way from the global framework under ICAO's leadership.

 I expect AFRAA to in due course release a statement on the adverse effects of the EU ETS on African airlines and their profitability.

IATA estimates that the ETS could cost airlines $1.2 billion this year.


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