Nobel economists urge Obama: back EU carbon limits

Tue Mar 13, 2012 6:35pm EDT

* EU plan would charge airlines for carbon emissions

* Economists urge Obama to drop opposition to plan

* Aviation bosses have lobbied against carbon charge

BRUSSELS, March 13 (Reuters) - Top U.S. economists, including five Nobel Prize winners, have urged U.S. President Barack Obama to drop his opposition to charging airlines for carbon emissions under a European Union scheme that has drawn fierce opposition from airlines and governments around the world.

The 26 U.S. economists made their case in a letter that will be handed to Obama on Wednesday. A copy was made available to Reuters.

The United States, along with China, India, Russia and the aviation industry, have expressed outrage at the European Union scheme to require all airlines using EU airports offset emissions of gasses blamed for global warming.

The measure would come under the EU Emissions Trading Scheme.

European aviation bosses, among the latest to lobby against the EU's scheme, wrote to political leaders late last week saying aircraft orders worth many billions of dollars from China were in jeopardy as a result of the EU law.

But the U.S. economists from leading universities such as Harvard, Stanford, Columbia, Princeton and Berkeley said in their letter to Obama that the EU was doing the right thing in trying to curb rising airline emissions.

"We implore you to support the European Union's innovative efforts to place a price on carbon from aviation through the emissions trading system (EU ETS), or, at the very least, to stop actively opposing these efforts," said a copy of the letter seen by Reuters.

"Today the U.S. is leading a coalition of unwilling countries on a course of refusing to price this risk in the commercial aviation sector."

The EU's law to make all airlines pay a carbon cost took effect on Jan. 1, although companies will not face a bill until next year and initially many of the allowances they will need to offset emissions will be handed out for free.

Critics complain the EU carbon scheme amounts to a tax that infringes on national sovereignty. The EU says it is not a tax because it is based on buying and selling allowances on a market and airlines can avoid costs by finding "alternative measures" to offset their emissions.

European Commission officials have said they will only modify their law if the United Nations' International Civil Aviation Organization (ICAO) can come up with alternative global scheme to curb airline emissions.

ICAO is expected to discuss possible options at talks this week.

"Rather than opposing the EU, we urge your administration to support their efforts to price carbon in the context of the ICAO," the letter said.

The Nobel Prize winning signatories are Kenneth Arrow of Stanford University, William Sharpe, also of Stanford, Eric Maskin of Harvard University, Thomas Sargent, New York University, and Christopher Sims of Princeton. (Reporting by Barbara Lewis; Editing by David Gregorio)