Flying bind

Bloomberg EU Permits markets July 11

Qantas—the air­line that will soon call Sin­ga­pore home (?)—says con­sumers will foot the entire bill for the un-com­pen­sat­ed tax on avi­a­tion fuel.

The air­line has a bet­ter chance to off­set the oth­er threat it faces from a Euro­pean air­lines tax. The Euro­pean emis­sions per­mit mar­ket is today offer­ing a tonne of car­bon at a lit­tle more than half the Aus­tralian price: about $16.

John Han­noush asks whether the Aus­tralian tax lia­bil­i­ty will also count in Qan­tas’ favor when the Euro­crats impose their air­lines tax. It’s not clear: the two tax­es are very dif­fer­ent. Labor and the Greens want to tax pro­duc­tion of fuel in Aus­tralia—pre­sum­ably to give the air­lines an incen­tive to use “non-pol­lut­ing” pow­er like…um, bat­ter­ies? rub­ber bands?—whereas the EU wants to tax fif­teen per­cent of the CO2 pro­duced by jet-engines fly­ing to or from Europe. The ques­tion whether one tax is “equiv­a­lent” to the oth­er, and thus mer­its a Kyoto-style “off­set”, may have no answer out­side the obscure world of reg­u­la­to­ry inter­est-bro­ker­age.

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