By Gerard Wynn
LONDON Nov 28 The European Union's postponement
from regulation of airline emissions outside its airspace takes
carbon border tariffs off the international trade agenda.
Policymakers will have to go back to the drawing board on
how to devise multilateral climate action in the absence of an
elusive global deal.
The EU's proposed action was the world's first attempt to
affect other countries' climate policy, requiring airlines to
buy permits accounting for their full flight emissions unless
the country of origin had similar carbon controls as the
European emissions trading scheme.
It drew global condemnation.
The EU's executive Commission two weeks ago postponed
implementation while it gave the U.N.'s International Civil
Aviation Organisation (ICAO) a year to try and agree a global
But President Barack Obama still signed on Tuesday a bill
preventing U.S. airlines complying with the law, underlining the
political mileage from trade posturing even after the EU had
delayed its action.
Climate change ultimately can only be tackled through
multilateral action as a "global commons" problem where carbon
emissions harm everyone, not just the polluter, and mitigation
action similarly benefits the whole world including those who do
The term originates from the 1,000 year old problem of
sharing land to graze sheep where each farmer only had concerns
for his own welfare, and continued to feed his sheep even as the
land became critically degraded and the grass was bitten down to
Both green groups and industry have concerns about using
unilateral action to tackle the global climate problem.
Greens are worried about carbon leakage, where affected
industry would simply move offshore to an unregulated
jurisdiction and carry on emitting.
The industry side of the same coin is the competitiveness
impact from tougher carbon controls at home.
There is evidence that carbon leakage is real in Europe, the
main region to regulate carbon: for example western Europe's
consumption emissions - including the carbon content of imports
- have risen since 1990 while its territorial emissions have
No country has yet tested whether border carbon tariffs
would be eligible under the World Trade Organisation (WTO).
Air transport is excluded from the WTO's agreement on trade
in services, meaning the EU action was always outside that
formal trade agreement.
The EU has chosen not to impose border taxes on other
commodities which are subject to the WTO, such as steel.
Instead it shields these sectors from competitiveness
impacts by allocating them free emissions permits under its cap
and trade scheme.
Politically, that gains favour with steelmakers but
economists point out it does not counter carbon leakage: the
affected companies could simply sell the free allowances and use
the cash to move offshore.
A proposed U.S. climate bill (the American Clean Energy and
Security Act of 2009) also proposed to hand domestic industry
free allowances, but held out the ultimate prospect of border
taxes which would force importers to purchase allowances
equivalent to the carbon dioxide emitted in their manufacture,
exactly as the EU had planned for airlines.
"The U.S. Customs and Border Protection, shall issue
regulations ... requiring the submission of appropriate amounts
of such allowances for covered goods with respect to the
eligible industrial sector that enter the customs territory of
the United States," it said.
But the bill never passed the Senate, and so carbon tariffs
The aim of carbon border tariffs is to affect the
environmental regulations of other countries.
That idea got short shrift in the United States regarding
the country's airlines.
"The Secretary of Transportation shall prohibit an operator
of a civil aircraft of the United States from participating in
the emissions trading scheme unilaterally established by the
European Union," said the EU Emissions Trading Scheme
Prohibition Act, as signed by Obama.
The rhetoric was more succinct.
"It never made a bit of sense for European governments to
tax our citizens for flying over our own airspace," said
Democratic Senator Claire McCaskill, a co-author of the bill.
But trade officials gave the United States a similar riposte
to its attempted ban on imports of Mexican tuna in 1991, on the
grounds that their nets killed more dolphins than the U.S.
"It's against international law that internal regulations
are applied to foreign countries," said a Japanese official, as
quoted in the New York Times, in support of the Mexican
The dolphin-tuna case was billed as the first big test of
whether environmental concerns can be a factor in restricting
imports, and failed.
But the earlier 1987 Montreal Protocol on phasing out
ozone-depleting chemicals had allowed trade retaliation against
countries which did not comply or were not party to the
protocol, by banning imports from such countries - only the
measure was never used.
And a WTO panel upheld a subsequent U.S. ban on shrimps from
countries which failed to protect sea turtles, provided the
United States first acted in "good faith" in trying to negotiate
The 1997 Kyoto Protocol on global warming failed to make
explicit allowance for multilateral trade controls, and the
matter is not discussed in negotiations for a successor climate
agreement continuing this week in Doha, Qatar.
"We need a multilateral regime to guide climate-related
trade measures," said Harvard University's Jeffrey Frankel in a
2009 paper, "Global Environment and Trade Policy."
"Ideally the regime would be negotiated along with a
successor to the Kyoto Protocol that sets emissions targets for
future periods and brings the United States and developing
The problem is a lack of multilateral momentum to tackle
climate change where Obama's approval of an anti-EU bill is
illustrative, as well as the snail's pace of action under U.N.