Rhein on Energy and Climate

Kerosene is the only fuel that is globally exempt from any taxation. This bizarre situation is due to an extensive interpretation of article 24 of the Chicago Convention (1944!) on civil aviation, which provides that states should admit aircraft temporarily free of duty and that fuel shall be exempt from customs duty.

This provision prevents any state from even taxing its domestic carriers when taking kerosene, as this would give foreign competitors a competitive advantage. That is why the EU had to abstain from imposing a kerosene tax on domestic and intra-EU flights in 2004, which it wanted to do under the Directive 2003/96 EC. But the International Civil Aviation Organisation (ICAO) prevented EU countries from also extending the tax upon foreign carriers using EU airports.

It is overdue to put an end to legal provisions that no longer make sense in the era of globalisation and climate change increasingly caused by aviation. Since 1990 C02 emissions from air transport have risen faster than from any other source, due to the rapid expansion of air transport. Today their share of global C02 emissions is in the order of 2 percent. Allowing business as usual the emissions from aviation might double until 2020.

It should have been the duty of the ICAO to negotiate a global agreement for cutting C02 emissions from air transport. But despite several efforts it has not been able to make much headway in its negotiations: another proof of the incapacity of UN bodies to agree by consensus.

The EU has therefore decided to go it alone. As of 2012, all carriers, domestic and foreign, using EU airports will fall under the EU emission trading system. This will establish a level playing field and overcome the legal objections of Article 24 of the Chicago Convention, which ignores emission caps. The USA has, however, protested against the EU proceeding unilaterally and “taxing” its carriers. Other countries are likely to follow suit when the Commission will submit a formal proposal in the course of 2010.

This should be the ideal opportunity for the EU to ask for a re-interpretation of Article 24 of the Chicago Convention: in the light of pressing climate problems every country should have the freedom to tax kerosene. Domestic and foreign carriers should be subject to a kerosene tax, without any discrimination and reciprocity. A kerosene tax is important for the majority of countries which do not dispose of the administrative machinery for effectively managing a cap and trade system for emissions from aviation but still consider it necessary to tackle the rise of C02 emissions from that source.

It is time for humanity to wake up to the challenge of C02 emissions from aviation and stop being impeded by a dubious juridical interpretation of a Convention that has been negotiated 65 years ago in a totally different global environment! It is not tolerable for the UN Secretary General to preach action against climate change and ignore the inaction of a major UN agency under his orders!

Brussels 10.03.10 Eberhard Rhein

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