A law requiring flights into and out of the European Union (EU) to pay a carbon tax was upheld by the European Court of Justice on Wednesday saying that, “application of the emissions trading scheme to aviation infringes neither the principles of customary international law at issue, nor the open-skies agreement.”
The law requires that any aircraft landing or taking off from an EU airport is required to purchase a carbon permit which could cost the airlines, passengers, freight carriers and customers nearly $12 billion by the end of 2020. The amount of the tax is proportional to the distance flown by the airplane after departing an EU airport or from the last take-off prior to reaching an EU facility.
The most immediate impact will be the it will now cost more for Europeans to travel anywhere by airplane and freight costs requiring air transport will be more expensive.
The airlines have little choice and are complying with the ruling “under protest”. The cost of the tax will be passed on to passengers making travel to and from Europe more expensive.
Freight carriers are taking a different approach to the business-killing decision. UPS is studying ways to redirect flights around the EU. In an interview with The Wall Street Journal the carrier explained how it might modify its routes to deal with the expensive carbon tax:
Mitch Nichols, president of UPS Airlines, said in an interview that the company may look at redirecting flights between its hubs in Hong Kong and Cologne, Germany, by going through Mumbai. That will cut the cost of the tax by about a quarter because UPS would only be charged for the distance flown between Cologne and Mumbai.
Airlines are unlikely to make similar changes, but passengers might. While the airlines will still offer direct flights into Europe, savvy travelers may opt to fly into a nearby non-EU nation simply because the ticket won’t have the up-charge on it or they may choose alternate destinations altogether.
Ultimately the tax will have a stifling effect on EU manufacturers as it will cost more to bring raw materials into the EU and be more expensive to ship finished goods out. The affirmation of the proposed change could put more pressure on European manufacturers to move their operations to non-EU countries.