Battle Over EU Airline Tax Risks "Carbon Trade War"; US Congressman Equates Tax to " Barbary Pirates for Safe Passage"; Insanity of Cap-and-Trade Revisited

Led by the US and China, 26 nations are now protesting the EU's airline carbon tax, and a outright Carbon Trade War Edges Nearer.

An alliance of countries opposed to a carbon tax on airlines is threatening to tear up trade deals with the European Union and impose new taxes on EU carriers, in a sign the world?s first carbon trade war is edging closer.

A meeting has been called for next week by the 26 countries that have been fighting to stop Brussels? charging airlines flying in or out of the EU for their carbon emissions.

China has already told its carriers to ignore the EU legislation which took effect from January 1 and US legislators are attempting to push a similar measure through Congress.

Retaliatory Measures Considered

• Re-open existing trade agreements in sectors other than aviation to put ?pressure on EU industries?.
• Impose new charges on European airlines flying into non-EU countries.
• Suspend current and future negotiations about EU airline requests for new routes or airport destinations.
• Review important bilateral aviation agreements with individual EU states.
• Enact legislation banning their airlines from complying with the EU law.

Airline Tax Background

For background on the airline carbon tax, please consider Emissions: Rivals dig in over EU carbon trading scheme

The European Union has decided that from January 1 2012, any airline flying into or out of the EU will be charged for its carbon pollution.

That is due to aviation being brought into the EU?s six-year-old emissions trading scheme (ETS), a system that obliges companies to pay for permits (or allowances), each equal to one tonne of carbon dioxide, to cover their annual emissions.

The decision to extend it to companies outside the bloc ? foreign airlines ? is the EU?s most ambitious move yet to force the rest of the world to comply with its environmental rules.

The ATA [American Transport Association] estimates the scheme would cost US airlines more than $3.1bn between 2012 and 2020, though some analysts say the costs will be lower.

Barbary Pirates for Safe Passage

China told its airlines to ignore the tax, and Republicans in Congress seek to pass similar legislation.

"The ETS scheme is equivalent to the paying of ransom to the Barbary pirates for safe passage" said Chip Cravaack, the first Republican since 1947 to win Minnesota's 8th congressional district.

Insanity of Cap-and-Trade Revisited

For further discussion of the absurdities of carbon tax trading and credits for renewable energy, please see ...

• Solar Energy Madness in Europe
• Walmart, Costco, US Bank Profit From Energy Credits in US; Carbon Tax Thrown Out By French Court

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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