EU Emissions Trading: Building on failure

The EU is proposing to extend its Emissions Trading Scheme (ETS) to the aviation industry.  Below is a recent piece I have just written for an aviation magazine which I thought I would share here on the blog:-

There are two reasons why aviation should not be included in the EU’s ETS.
First, the industry is critical to economic growth.  It is already making huge efforts to improve efficiency, and the rising price of av-gas creates all the incentive we need for improved fuel economy.  Aviation is also (despite the green propaganda) already taxed quite substantially.  On a recent RyanAir flight to Frankfurt (for Strasbourg), I noticed that my return ticket cost 2p, while various taxes took the bill to £50.  Any attempts to add cost within the EU alone will damage Europe’s competitiveness in the global environment.
The second reason is quite simply that the EU’s ETS is a vast failure.  While conservatives are attracted to market solutions, this is not a real market.  It is riven with anomalies and distortions resulting from qualifying criteria, initial conditions and grandfather rights.  In its first years it has not reduced emissions at all: it has merely increased costs for those countries (like the UK) which have been responsible with initial allocations.  While reform is promised (reform is always “jam tomorrow” in the EU), we will simply see CO2 allocations bought-in from régimes with lax rules, like China.  This will not reduce emissions, but it will hugely add to industry costs.
The EU should make sure that ETS works before involving new industries.  Better yet, it should scrap ETS entirely.  If it must bear down on CO2, a straight carbon tax would be hugely simpler, fairer and less damaging.

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