India has threatened to move World Trade Organisation (WTO) against the European Union if it fails to withdraw carbon tax to be imposed on flights landing or taking off from European airports from January 2012.
Even though the additional per passenger cost would be around six US dollars, Indians would be paying approximately about one billion US dollars a year to Europe. Similar cost for China would be about four billion US dollars.
Money is not the worrying factor for India, as a senior environment ministry official puts it. But, the concern is that the tax will give kick-start similar unfair trade practices in the name of fighting climate change. Europe is already talking about imposing a similar carbon tax on imported high carbon emitting fuels from 2013-14.
In the world’s first, the European Union earlier this year decided to bring aviation sector from January 2012 under EU Emission Trade Scheme, which imposed a penalty for failing to keep carbon emissions within 10,000 tonnes a year.
It would mean that a Boeing 747 flying from Delhi to London will exhaust this quota within a month and thereafter, will have to pay the environmental degradation tax for landing on European airports. The decision was taken after EU found that aviation sector was spewing 20 % more carbon dioxide into the environment than previously estimated.
India has not bought the European claim and Indian environment minister Jayanthi Natarajan lodged a formal protest with the European Union this week terming the decision as “unfair” trade practice. Natarajan in a letter urged Europe to withdraw the unilateral tax till a consensus is built on the issue at United Nations Framework Convention on Climate Change.
“We believe European carbon tax is just a start of a new global tax regime to adversely hit business of emerging economies such as India and China…We will have no option other than to approach WTO if it is not withdrawn,” a senior government functionary said.
The issue would be discussed at a meeting called by Cabinet Secretary Ajit Kumar Seth on Friday, where officials from ministries of civil aviation, commerce and environment will participate. “We are seeking legal opinion on how we can approach WTO,” the functionary said, while explaining that aviation is not trade but service sector. WTO covers only trade sector.
The issue of carbon tax came up at a recent UNFCCC meeting in Bonn, Germany, where India along with the biggest group G-77 plus China opposed it. They termed it as an unfair practice against the developing world as under UN protocol to flight change the historical polluters --- rich countries --- have obligation to reduce carbon emissions and pay to the developing world to adapt to adverse implications of climate change. “By levying carbon tax, developing countries would be paying to rich nations,” a government official said.
Environment ministry officials said India will also raise the issue at the next meeting of Basic countries --- a group of India, China, Brazil and South Africa – in August to garner more support against the decision.