Here’s my take on the EU aviation carbon tax that is causing a stink with major world airline carriers:

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Tyler Hamilton

My family flew to North Carolina during the holiday to visit relatives and, being aware of new baggage fees, we made every effort to pack lightly.

Of two adults and two children we had only one item to check in. Not bad. But it still meant paying $25 to get the bag to Charlotte and another $25 to get it back home. Had we each checked just one bag for our one-week trip, it would have cost the family $200.

I point this out because I’m perplexed by Air Canada’s strong opposition to the European Union’s new aviation carbon tax, which went into effect Jan. 1.

The airline — as well as other members of the National Airlines Council of Canada — has no problem arbitrarily adding $50 to the price of a 2,500-kilometre round trip to the United States.

But it won’t tolerate the European Union slapping on a carbon tax that would only add $1.45 to a $500 round-trip ticket between Toronto and Frankfurt, Germany, a journey that covers five times the distance.

How did I come to $1.45? Anyone can calculate the impact on any trip to Europe. Just go to the website of the International Civil Aviation Organization at and click on the carbon calculator link at the bottom-left of the screen. Or click here.

A round trip between Toronto and Frankfurt generates 922 kilograms of carbon emissions per person. Per tonne, the price of carbon emissions on the European market is about $10.50, so the price for 922 kilograms would be $9.68.

But that’s not what airlines would initially have to pay per passenger. Under the new European aviation tax scheme, airlines still get a free pass for 85 per cent of their emissions. With the tax only applying to the remaining 15 per cent, that works out to $1.45 that will surely be passed along to consumers.

As industry observer Bill Hemmings said, “Commercially it’s a non-event.” Airlines arbitrarily change online flight prices on a minute-by-minute basis by much larger amounts.

Yet Air Canada and its fellow airlines in Canada, the United States, China, India, Russia and Japan insist on demonizing the fee and amplifying talk of trade wars and unproven claims of job destruction. It doesn’t matter that the European Union Court of Justice ruled recently that the new tax does not contravene international law.

“This ruling by no means settles this matter,” George Petsikas, president of Canada’s airline council, said defiantly after the European court ruling.

Those opposed to the EU’s actions argue that the matter of emissions reductions in the global aviation industry is best addressed through a “coherent, multilateral framework” via the International Civil Aviation Organization (ICAO).

The solution, they feel, is to create yet another international initiative that likely will lead to more delay and inaction on pressing climate matters.

Been there, done that. What’s admirable about the EU approach is that it’s about more action and less talk. Understandably, it’s tired of waiting for the rest of the world to get its act together.

The aviation sector accounts for 3 per cent of global emissions, but both its share of global emissions and its absolute contribution are expected to grow under a do-nothing scenario that isn’t sustainable.

To be fair, the industry hasn’t been idle. Fuel efficiency has improved by 16 per cent between 2001 and 2008, according to the International Air Transport Association. Since 1990, major Canadian airlines have improved fuel efficiency by 31 per cent.

But it’s not enough, and there’s a whole lot more that can be done. A sector-specific carbon tax that grows gradually and includes more countries over time will accelerate innovation and give the most fuel-efficient airlines an edge over competitors.

As airline fleets are renewed there will be greater incentive to embrace more efficient engine technology and light-weight materials, such as carbon fibre, in the design of new aircraft.

The air transport association estimates the industry will spend $1.5 trillion on new aircraft by 2020, resulting in more than a quarter of the global fleet being replaced. It’s important to make sure new aircraft are built and purchased with fuel-efficiency top of mind.

Airlines will also be more motivated to use renewable jet fuel products in old and new aircraft to offset their carbon footprints. There’s tremendous promise with respect to carbon-neutral jet fuels derived from algae, wood waste, inedible plants such as camelina, and even industrial waste gases.

One advantage is that aviation is a relatively easy market to target. There are fewer than 2,000 airports around the world that serve as major fuelling hubs for airplanes, so the required infrastructure changes to accommodate renewable jet fuel are quite manageable. Contrast this with the hundreds of thousands of fuelling stations that service cars worldwide.

Jet fuel also represents less than 8 per cent of global demand for oil products, so it’s not as daunting as tackling the market for consumer vehicles, which consume more than 40 per cent of oil supply.

The industry says it is already going down this innovation path. That only makes the EU carbon tax even more benign. The EU, meanwhile, has said that any airline headquartered in a country with similar emission-reduction policies would be exempt from the EU tax.

So what, exactly, is the fuss all about? It’s about the rest of the world not liking Europe taking the lead and telling it what to do, and even though it’s clear that we need to do it.

It certainly isn’t about the financial interests of travellers, who have been and will continue to be penalized much more by arbitrary fees designed to pad the bottom line.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies. tyler@cleanbreak.ca

My Clean Break column today addresses a grudge I and many others have held against federal NDP leader Jack Layton, who passed away in August. Layton, as terrific a political leader he was, got it wrong when he adamantly opposed the suggestion during the 2008 election that Canada implement a national carbon tax. Layton favoured a cap-and-trade system, and as a result assisted Prime Minister Stephen Harper in attacking then Liberal leader Stephane Dion and his visionary (and controversial) Green Shift plan.

Fact is, Layton and Dion supported a price on carbon — that should have been more important than the details on how that price was created. By making it an election issue, Layton helped sabotage any momentum to price carbon in Canada, making it a toxic issue that to this day no federal politician without suicidal tendencies will touch.

My argument is that we need to get over this fear of a carbon tax (or carbon pricing in general), create a discussion about it — both nationally and in Ontario — and recognize how putting a price on carbon can help get our fiscal house in order and strengthen an otherwise weak climate strategy.

See column below:

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Tyler Hamilton

It’s hard to hold a grudge against Jack Layton.

Passionate. Likeable. Well-intentioned. Caring. These are all words to describe the former federal NDP leader.

He had a lot of things right, but many still don’t forgive Layton for helping to sabotage a proposal in 2008 that called for the creation of a national tax on carbon emissions.

The idea came from then Liberal leader Stéphane Dion, who called his plan “the Green Shift.” Money collected from a carbon tax would be used to lower personal income taxes and invest in social and environmental programs, ultimately reducing Canada’s dependency on fossil fuels and assisting the shift to a low-carbon economy.

Layton aggressively attacked the plan, contributing to a Liberal implosion at the polls and a Conservative re-election that gave us our current do-little climate strategy.

It’s not that Layton opposed putting a price on carbon; he just favoured a different approach — a complex cap-and-trade system that would let the market set the price and let the government set and adjust the emissions cap.

And it’s not like Dion did himself any favours. He had a decent policy in his hands but he did a horrible job of selling it to the public and failed miserably in defending it against Prime Minister Stephen Harper’s campaign of smear and fear.

The bitter pill is that Dion and Layton both had the goal of putting a price on carbon. Both saw it as necessary for making our industries more resource-productive while achieving meaningful emissions reductions and fulfilling international climate obligations.

But many blame Layton for playing the spoiler, and as a result, for taking talk of a serious carbon-pricing plan off the table, where it rests toxic to this day.

“You basically can’t speak of it in political company,” says Alex Wood, senior director of policy and markets at Sustainable Prosperity, a green economy think tank in Ottawa. “There’s no political home for it.”

Not federally, at least. British Columbia took the big step in 2008 with the same kind of revenue-neutral carbon tax proposed by Dion. As controversial as it was and continues to be in many circles, it hasn’t plunged the B.C. economy into an abyss.

Quite the opposite. The province now has the lowest per-capita consumption of gasoline in the country and the lowest income tax rates. Its GDP has grown over the past three years at a time when the global economy is struggling, and the expectation is that B.C. will outperform the Canadian provincial average in 2012.

Carbon emissions, meanwhile, appear to be heading in the right direction. Next year the tax will rise to $30 per tonne of CO2 equivalent emissions, pulling in nearly $1 billion for the province, which will redistribute that revenue mostly through income tax cuts.

Each year that passes makes it harder to kill the B.C. carbon tax, says Wood. “No government will be able to come in and say we’re cutting this but we’ve got to raise your taxes. Politically it’s achieved an almost untouchable status.”

So when Harper insisted Dion’s plan would “screw everybody,” as The Economist magazine recently reminded us, it’s instructive to look at B.C. as we head into climate talks next week in Durban, South Africa, and ask: are we collectively getting screwed by not having a national carbon-pricing scheme?

We have a sense of the economic costs of not acting. The independent National Round Table on the Environment and the Economy estimated in September that climate impact costs for Canada would reach $5 billion annually by 2020 and as high as $43 billion a year by 2050.

Australia, a kindred spirit to Canada with similar resource-dependent industries, has seen that writing on the wall. It decided after years of Canadian-style foot-dragging that a carbon price is good for the country’s long-term economic health.

It is now poised to introduce a national carbon tax in July 2012 that will morph into a cap-and-trade system after a few years. The policy is part of a larger economic reform initiative aimed at making the transition to a clean energy economy.

An optimist might hope that Australia’s move will rub off on Canada, which could use the revenues from a carbon tax (or cap-and-trade system) to help get its fiscal house in order. It could generate tens of billions of dollars annually by 2020 that could go toward lowering income taxes, reducing the deficit, or boosting investment in climate-friendly public infrastructure projects.

If not federally, maybe it will rub off on Ontario. Saddled with what’s expected to be a $16-billion deficit this year, the province could benefit by slapping a price on carbon.

That was the plan in 2008 when Ontario joined the Western Climate Initiative, a group of Canadian provinces and U.S. states (including California) trying to set up a regional carbon cap-and-trade system. But six U.S. states recently pulled out and Ontario, which was supposed to launch on Jan. 1, is now waffling.

Maybe former TD Bank economist Don Drummond can talk some sense into Premier Dalton McGuinty. Drummond is expected to issue a report in January that will advise the McGuinty government on how to proceed with economic reforms.

Drummond is a fan of carbon pricing, particularly the idea of a carbon tax, having endorsed Dion’s Green Shift plan for the benefits it could bring to the Canadian economy.

It’s not entirely impossible that Drummond might try to stimulate talk of an Ontario carbon tax for Ontario, as toxic as the two words might be.

No thanks to Jack.

But seriously, isn’t it time we had an honest and adult discussion about it?

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies. Contact him at tyler@cleanbreak.ca.

I’m in Vancouver today, off to L.A. tomorrow as part of the research effort for my upcoming book on clean energy innovation. Sorry I haven’t posted for a while, but will get back on track when I return to Toronto later this week. I did, however, want to draw attention to my latest Clean Break column in the Toronto Star that calls for serious carbon tax talks in Canada. Yes, yes, I know — controversial, taboo, don’t go there. But we must. I’m not convinced cap-and-trade is the way to go, given the enormous potential and likelihood of abuse. Besides, we’re not anywhere close to implementing a comprehensive cap-and-trade regime in North America. A carbon tax is simpler, more transparent, sends the right signals to consumers and is easier to implement. Most of the folks in industry, government, the financial sector and academia that I talk to privately tell me they favour a carbon tax, but few seem willing to stand up and champion the issue. That’s a shame, because I’m convinced that without this price on carbon — and a meaningful one, I might add — Canada will become less productive over time and will suffer from an innovation deficit. Ultimately, this will harm our global competitiveness while doing nothing to play our part in reducing global CO2 emissions.

And what of the Alberta problem? The feeling from our western cousins is that a federal carbon tax would be a transfer of wealth in disguise, flowing from west to east. But I don’t see why a federally set carbon tax need impose a transfer of wealth. The provinces, charged with collecting this tax, could also be permitted to spend it as they see fit within their own borders. Under the condition, of course, that it be spent on serious carbon-reduction initiatives, and hopefully not just carbon capture and storage. Because such initiatives would be in-province, this would add to economic growth and diversity — it would benefit, not harm Alberta, though I’m under no illusions there will be some transitionary pains and lots of complaining. In any event, it’s doable if we’re willing to talk about it and get creative with how to implement it.

My Clean Break column today laments the fact that Canadians didn’t give the idea of a carbon tax serious debate or consideration in the last federal election. The Liberals, under Stephane Dion, proposed a carbon tax as part of a “Green Shift” plan that would use proceeds from that tax to lower personal and income taxes. In other words, it was revenue-neutral for the government. Unfortunately, the Liberals and its leader did a poor job of communicating the plan and the Conservatives, under Prime Minister Stephen Harper, did an excellent job of scaring Canadians into rejecting it.

My disappointment comes not with the Liberals losing, it comes from the fact that the idea of a carbon tax is unlikely to be entertained on the Canadian political scene for some time now given the rough ride the Liberals got. It’s for this reason I’m someone elated that the idea is being given serious attention in the United States, and not just by Al Gore and friends. Republicans appear quite happy to entertain the idea, and so too are some of the major oil companies — Exxon Mobil included.

Now, who knows where this will go? But it’s nice to know that, in a continental context, the idea is still alive and that people are willing to compare and contrast the benefits of a carbon tax against a cap-and-trade system that many, including myself, perceive as inefficient, complex and prone to manipulation.