Home / Politics / Policy /  Burden from carbon tax will be minimal on India: EU

New Delhi: The financial burden on India on account of the European Union’s (EU) proposed carbon tax on airlines will be minimal when compared with the overall levy, a EU official said, as the local government steps up pressure against the plan.

“India-related emissions will be only 0.2% from the total of aviation emissions under EU-ETS (emission-trading scheme)," Robert Donkers, minister counsellor (environment) from the European delegation to India, said over the phone. This includes Indian as well as European carriers flying to and from EU, he said.

Besides India, the US, Russia, China and other nations are opposing the carbon tax that the EU wants airlines to pay for emitting carbon while flying over Europe.

The Union government has told Parliament the impact of this tax on airfare is likely to be substantial. “The likely impact on the airfare, though expected to be significant, is not being estimated as no Indian carrier is submitting the trial data required this year on emissions in view of the stand of the government to oppose the scheme," civil aviation minister Ajit Singh said in response to a question in Parliament on 31 August on the impact of the proposed carbon tax.

“Irrespective of the amount of carbon tax on aviation we will have to pay to EU, we are going all out to protest against it because we know that this will set a wrong precedent and more carbon taxes will follow if we agree to one," said an environment ministry official, declining to be identified. The EU’s proposal is in contravention of multilateral pacts on climate change, this person added.

Mint reported on 24 July that the EU might not stop at an aviation tax and had plans to tax emissions from the maritime sector as well.

The Union government has formally prohibited Indian carriers from participating in the EU-ETS or submitting emissions data. The EU started including emissions from airlines flying to or from a European airport in the emission trading scheme from 1 January and asked all airlines to submit their emissions data by March 2013.

Despite the opposition, the EU does not plan to roll back the carbon tax on aviation.

“There is a provision in our legislation which can exempt flights from India (from paying carbon tax to the EU) if the Indian government takes measures to reduce pollution from their airlines, which can be discussed bilaterally," Donkers said, adding that discussions between EU and Indian officials have not led towards a bilateral solution.

The environment ministry official quoted above said this suggestion is not an option as India considers EU’s plan illegal as it would amount to imposing its laws in multilateral pacts. “We’ll have to firstly comply with their laws (to reduce pollution) and accept their laws as the benchmark. There is no question of doing anything bilaterally," he said.

Environment minister Jayanthi Natarajan has written to the EU on India’s stance but has only received a standard response saying, “Directives (for the tax) have been issued."

Indian carriers that fly to Europe, such as Air India Ltd and Jet Airways (India) Ltd, will have to bear the burden of the proposed levy.

Prodipto Ghosh, distinguished fellow at The Energy and Resources Institute (Teri) think tank, said countries can’t start proposing taxes on other countries according to their own laws.

“The United Nations Framework Convention on Climate Change (UNFCCC) regime has been established to address the climate change issue. If EU wants to do something unilaterally then every agency will start imposing its own policies in the context of climate change without any reference to UNFCCC," he said.

UNFCCC is an international agreement on environment under which nations that have ratified it have committed to a “voluntary non-binding" aim to reduce greenhouse gas emissions. The treaty contains no enforcement mechanisms and is considered legally non-binding.

A research paper published in April in the Journal of World Trade shows that the fears of more unilateral carbon taxes might not be unfounded. The paper claims the EU might expand the EU-ETS to levy a carbon tax on products from several other sectors post 2012.

Titled How vulnerable is India’s trade to possible border carbon adjustments in the EU, and based on a list released by the EU in 2009, the paper explains how the EU’s proposal to include carbon adjustments from across borders in its post-2012 climate change and energy package might result in carbon taxation getting levied on as many as 4,010 products.

“These products are from various sectors like chemicals, electrical machinery, minerals, wood, etc. This will hugely affect India’s export to the EU markets," said Biswajit Dhar, one of the authors of the paper and the director general of a government think tank, Research and Information System for Developing Countries.

The EU is one of the larger trading partners of India. A little more than 18% of India’s total exports were to the EU for the year 2010-11.

“India is dependent on the markets in EU and any action by EU against our exports can hurt us badly," Dhar said.

The paper said the EU will try to push such taxes under the broader carbon adjustment scheme.

This will affect imports from countries that are not implementing comparable greenhouse gas emission reduction measures on the grounds of addressing the risk of carbon leakage, the paper said.

Carbon leakage happens when the carbon dioxide (CO2) emission reduction achieved by certain countries is offset by an increase in CO2 emissions in non-abating countries.

The EU commission in Brussels did not respond to an email by Mint asking about its future carbon tax plans.

Dhar said the EU’s move to levy carbon tax was against article 3.5 of the UNFCCC, which says that “measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade."

“They are trying to get compliance and diluting multilateral agreements like the UNFCCC," Dhar added.

Teri’s Ghosh said it is not as if India doesn’t have options to retaliate but if all countries pursue with this then, “not only will it lead to chaos in the global climate change regime but also (lead to an) unravelling of the global trade regime".

Tarun Shukla and Asit Ranjan Mishra contributed to this report.

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