EuroNasty II: Carbon Taxes on Maritime Transport?

[NOTE: Out of curiosity, I Googled "euronasty" and was shocked, just shocked at the search results! As I've said before, the IPE Zone is a family-oriented site.] There has already been much controversy over the European Union beginning to levy carbon taxes on air transport. In particular, their application to foreign carriers makes them complain that the EU regulation constitutes extraterritoriality insofar as (1) obviously, they aren't European carriers and (2) "taxable" miles are those incurred not just within EU airspace but for the entire journey. So far the EU has avoided contestation of the legality of these carbon taxes--probably because there is no discrimination between EU-based and foreign carriers.

That said, these carbon taxes are tremendously unpopular, especially among the Americans and the Chinese. The latter have supposedly even told their airlines not to buy from Airbus to "punish" the EU. They've even been instructed not to pay these taxes. Well, well, well: guess what? Other developing countries are also up in arms against the EU's levies. What's more, it seems the EU authorities aren't nearly quite done losing friends and offending people. In a recent newsletter sent to me by the South Centre, the Europeans appear keen on extending these taxes to shipborne transport, which would obviously affect a lot more merchandise trade if passed:

On 21 February 2012, the EU Council of economic and finance ministers adopted conclusions that included one on aviation and maritime carbon taxes. The Council of Ministers reiterates that "the carbon pricing of global aviation and maritime transportation would generate the necessary price signal to efficiently achieve more emission reductions from these sectors and that carbon pricing of global aviation and maritime transportation have as well the potential to generate large financial flows."

The Council invites "the (European) Commission to prepare a reflection paper by June (2012) on carbon pricing of global aviation and maritime transportation taking into account the developments in IMO (International Maritime Organisation) and ICAO (International Civil Aviation Organisation) and previous work by AGF (UN Secretary-General's High Level Panel on Climate Change Financing) and by the World Bank and other international organisations for the G20." It also stressed "the need of taking into account national budgetary rules and the principles and provisions of the UNFCCC (UN Framework Convention on Climate Change) in the use of potential revenue". 

As before, China is at the forefront of countries sounding the alarm. Lest you think that American hypocrisy is all we talk about here in the IPE Zone, what we have now is a clear case of Chinese hypocrisy. When it comes to the infamous maritime territorial disputes with its neighbours concerning the South China Sea, the PRC staunchly refuses to "multilateralize" the issue where multilateral fora can help negate its overwhelming power over Southeast Asian nations. However, when it comes to carbon emissions, China is now calling for the EU to, ahem, "multilateralize" this issue to rein in European power which it believes the EU is wielding unilaterally.

Perhaps the Chinese don't perceive their own inconsistencies, but here's what it's worth in the environmental domain. Aside from not bringing up maritime carbon taxes in appropriate multilateral fora, we return to the complaint about the blanket application of such taxes going against the principle of common but differentiated responsibilities for LDCs which still need to develop and have less technical capacity for climate mitigation. Remember too that China--the world's largest merchandise exporter--has the EU for its largest trading partner. Hence, the sheer amount of trade these taxes would affect given that most Chinese goods come to the Occident by sea is...substantial:

Though the EU Council has called for a "reflection paper" at this stage, there were already critical reactions to this move in China, which is one of the vocal opponents to the manner in which such mandatory taxes are determined even though there is a need to address greenhouse gases emissions in these sectors. Objections centre on the unilateral and mandatory nature of the EU action even while discussions continue in the IMO and ICAO, the two global organisations responsible for such issues.

Critics also raise the issue of common but differentiated responsibilities that underpin the UNFCCC, arguing that since climate change is the result of the accumulated greenhouse gases emissions of developed countries over the past two centuries, it is not equitable to impose the same level of burden on developing and developed countries (in this case the payment of carbon taxes in the aviation and maritime sectors). 

I generally understand what the Europeans are trying to achieve. By leading a movement to applying carbon taxes, the EU hopes to ratchet up environmental regulation worldwide. I call it seeking the California-effect globally. In the US, the strictest emissions and safety regulations emanate from California, and car manufacturers just make all their vehicles meet California standards rather than make different models for one state and all the rest. However, there are indeed questions of fairness that China brings up which are legitimate alike extraterritoriality and CBD.

Again, the honest truth is that Mother Nature could care less about artificial distinctions humans make between developed and developing nations. That is, carbon emissions are a shared externality to economic activity.