The 2nd Battle of the Carbon Tax War

Things are getting hot with the European airline carbon tax. China says it won't pay it, and U.S. is complaining too, and Europe is sticking to its guns.

Here is the basic idea, via the BBC:

Under the scheme...a pot of carbon credits will be created, set at 97% of the aviation industry's 2004-6 emissions.

These will be divided up between carriers according to how much pollution their flights caused in 2010.

Airlines will get 85% of their permits free, with the remaining 15% being auctioned.

Because so many are given away, the EU says the whole scheme will add just over £2 to a London-to-New York flight.

If airlines want more, they have to buy them, but equally if they have too many, they can sell them to other carriers.

"For example, British Airways, if they emit less than the cap, they have extra allowances which they can sell to make a profit," said Mr Valero.

They go on:

The aviation industry does not think this outcome will be very common. The latest figures from IATA show air passenger traffic grew by 8.2% in 2010.

"Our estimates are that it would add close to one billion euros ($1.4bn, £862m) in the first year on to the industry's costs and this is an the industry running on a margin of 0.7%," said Mr Goater from IATA.

So how much carbon dioxide does the airline industry emit (in the name of its passengers)? About 2-3% of worldwide emissions (half of that comes from US airlines). Wikipedia says there has been an 87% increase in airline emissions from 1990 to 2006.

But it's complicated by (1) other emissions, and (2) the altitude at which planes fly, and the total forcing from aviation may be as much as 5% of net anthropogenic forcing. A source in Wikipedia says

...per passenger a typical economy-class New York to Los Angeles round trip produces about 715 kg (1574 lb) of CO2, but is equivalent to 1,917 kg (4,230 lb) of CO2 when the high altitude “climatic forcing” effect is taken into account.

That's a lot--"more than nine times the annual emissions of an average denizen of Haiti." The average American now emits about 19,000 kg CO2 per year, so one round trip flight across the country is about 10% of that.

Delta Air Lines has already started a $3 surcharge to flights between the US and Europe (which is cheap for 2 metric tons of CO2). Singapore Airlines says they're going to try to reduce their emissions via better fuel efficiency (but might impose a surcharge later). Hey, that's just what a Pigovian tax is supposed to do!

So what's going to happen? I sure don't know, but my guess is that China and the US will continue to piss and moan about it, Europe will stick to their guns, and then the airlines will start quietly paying the fees and in time everyone will find something else to be outraged about. That worked with the Australian carbon tax, didn't it?