February 10, 2012
Market Based Instruments for International Aviation as a Source of Climate Finance
Blog readers may be interested to read a new paper by Michael Keen, Ian Perry & Jon Strand, Market Based Instruments for International Aviation and Shipping as a Source of Climate Finance (Jan. 1, 2012) World Bank Policy Research Working Paper Series (available from SSRN here). From the abstract:
The international aviation and maritime sectors today enjoy relatively favorable tax treatment, as their fuels are not taxed and the sectors are not subject to any value-added tax or turnover tax. Nor are these fuel uses subject to any global measures to reduce their associated CO2 emissions, even though they represent at least 5 percent of the global greenhouse gas emissions. A carbon charge on fuels for international aviation and shipping equal to $25 per tonne of emitted CO2 could raise about $12 billion from aviation and about $26 billion from shipping by 2020. Market-based instruments ought to be used to raise such revenue, preferably charges based on the carbon contents of fuels. Such charges would also scale back emissions by at least 5-10 percent. Developing countries ought to be able to keep their own tax revenue, and additional compensation to them for the economic burdens of these carbon charges may be warranted. Such compensation would constitute at most 40 percent of the raised global revenue. Implementing these charges can be a challenge, especially for aviation, where a large number of bilateral air-service agreements would need to be rewritten.
February 9, 2012
India to Allow Carriers to Import Fuel, Avoid Fuel Tax
Indian aviation minister Ajit Singh announced that, subject to cabinet approval, the Indian government has decided to allow Indian carriers to import jet fuel directly to avoid the significant sales taxes currently increasing fuel costs by approximately 24 percent. See Neil Munshi, India Aviation Gets a Fuel Lifeline, Financial Times, Feb. 7, 2012 (available here). While some analysts cautioned that cost savings would be mitigated somewhat by the costs of the infrastructure needed to import the fuel, this change is still seen as highly beneficial for Indian airlines. Combined with the anticipated removal of the ban on investment by foreign carriers, this move reflects a recognition by the Indian government of the severity of the problems facing the Indian air transport industry and the need to reform a regulatory regime that has contributed to the industry's struggles.
February 8, 2012
BA Reaches Revenue-Sharing Agreement with JAL
Oneworld partners British Airways and Japan Airlines have agreed on a revenue-sharing arrangement for flights between Europe and Japan. See Rosalba O'Brien, British Airways, JAL Plan Joint Business, Reuters, Feb. 8, 2012, (available here). This continues the ongoing trend within all three major alliances toward deeper integration between alliance partners. Both carriers will need antitrust immunity from their respective States.
February 7, 2012
FAA Bill Approved by Senate
Yesterday the Senate voted 75-20 to approve the Conference Report on the FAA Bill. The legislation will now be sent to President Obama for signature. Full analysis of the legislation to come.
February 6, 2012
Moscow Meeting Planned for ETS Opponents
Representatives of 26 countries, including China, Russia, India and the U.S., will meet in Moscow February 21 to discuss their shared opposition to the inclusion of their carriers in the EU Emissions Trading Scheme. See Michael Szabo, Opponents of EU Airline CO2 Scheme to Meet in Moscow, Reuters, Feb. 6, 2012 (available here). The talks will presumably include discussion of remaining legal options and potential retaliatory measures.
Full Text of FAA Reauthorization Bill
For those who are curious, here is a pdf of the current version of H.R. 658, the FAA Reauthorization and Reform Act, which is expected to receive a vote in the Senate today.