24th Oct 2016

Nobel laureates back EU tax on airline emissions

Five American Nobel-winning economists and 21 other US academics and businessmen have urged President Barack Obama to support the EU's hated CO2 tax on airlines.

The group-of-26 in an open letter to Obama dated 14 March accused the White House of "selfish inaction" which "pushes increased costs onto future generations, and dangerously increases the probability of extreme events with major impacts on their welfare."

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  • Obama boarding Air Force One - Nobelists accuse the US of 'selfishness' (Photo: White House)

"We implore you to support the European Union's innovative efforts to place a price on carbon from aviation through the emissions trading system, or, at the very least, to stop actively opposing these efforts," they said.

"Because emissions are not priced, the world is wastefully using up a scarce resource, the earth's ability to safely absorb greenhouse gas emissions."

The letter was signed by Nobel laureates Kenneth Arrow, William F. Sharpe, Eric Maskin, Thomas Sargent and Christopher Sims, two hedge fund managers from the New-York-based Kepos capital and professors from top US universities, such as Columbia, MIT, Princeton and Stanford.

The US at a meeting in Russia in February joined 19 countries, also including China and India, in a coalition to scupper the EU tax.

It discussed a number of countermeasures, such as banning national carriers from paying the carbon levy; imposing retaliatory fees on EU-domiciled airlines; blocking them from operating new routes; and triggering a complaint procedure at the International Civil Aviation Organization, a UN body in Montreal, Canada.

Last week, Chinese airlines said they may freeze $12 billion' worth of orders for Airbus jets in a move which could cost its EU-based manufacturer, Eads, 2,000 jobs. China's EU ambassador, Wu Hailong, told EUobserver the government did not order the freeze, but said it "makes sense" for the companies to freeze orders themselves.

This week, Eads CEO Tom Enders and the heads of eight other EU aviation giants, including Air France, British Airways, KLM and Lufthansa, wrote to the leaders of Germany, France, Spain and the UK also urging them to bin the CO2 levy.

"The aim must be to find a compromise solution and to have these punitive trade measures stopped before it is too late," they said.

The CO2 tax came into force on 1 January, but airlines will not get their first EU carbon bill until next year. According to Reuters, extra costs would be some €2 per passenger on, for instance, a typical EU-China flight.

Some analysts, such as Emmanuel Fages, from French bank Societe Generale, have in recent days predicted the EU will go for some kind of face-saving back-down to avoid a trade war.

But EU environment commissioner Connie Hedegaard in her latest statement on the subject after meeting with EU environment ministers in Brussels last Friday Tweeted that: "All member states repeated full support to the EU's line on aviation."

The Union's top court in Luxembourg in December also ruled that the CO2 levy is perfectly legal.


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