Greg Hunt (Flinders, Liberal Party, Shadow Minister for Climate Action, Environment and Heritage) Share this | Link to this | Hansard source

Our concern with the European Union ETS's application of a tax on international flights is about fairness and about effectiveness. Let me begin with the issue of fairness. If a new entrant were to enter the market to fly from Australia to the European Union, it would be hit with a massive tax because it would not be given the concessions that existing participants already have. Let us say, for example, that we were to have Jetstar or Virgin Australia fly directly to Europe. There is a prohibitive entrance fee on their ability to participate, and that is a completely uneven and inequitably levied tax. Secondly, what we also see is this same situation where existing Australian carriers—most notably Qantas, of course, as well as Virgin's international service—are also prejudiced. Let me give an example here. If Qantas flies from Australia to London, the tax is levied on the entire journey. Other flights, however, which are only from Australia to Abu Dhabi and then from Abu Dhabi to London and which have a different origination to or from Europe as the flight code, will only be taxed on the Europe to Abu Dhabi or Abu Dhabi to Europe leg. In other words, Australian carriers are specifically prejudiced under this legislation and under this particular tax regime. So it is an approach which is uneven and unfair, both for new entrants—which will effectively be cost-prohibited through non-tariff barriers from participating in international aviation involving Australia and Europe—and through a clearly unequal regime in relation to existing competitors and existing participants. Again, Australian competitors are treated badly.

But let it not be thought that it is only Australian competitors who feel that this is unfair and inappropriate. The government have made much of the fact that they think that China is about to embrace a heavy emissions trading scheme for itself. Clearly that is false. In the best-case scenario, in 2016 there might be a very thin system of $1.55, which is one-eighteenth or thereabouts of the system applying in Australia under the government's ETS, with what is projected to be $29 a tonne. In other words, there is a massive difference between the two rates, let alone the breadth across the economy. But the Chinese themselves have said that they believe that the European approach is unfair and unreasonable and that they will protect the 'rights of our nationals and our companies'. In particular, the Civil Aviation Administration of China notified all Chinese airlines that they cannot join the EU Emissions Trading Scheme or charge it to customers without government approval. In other words, the Chinese government has gone far further than anything proposed in Australia or applying to Australia and has put in place a ban on its airlines participating in or paying towards the European ETS in relation to international aviation.

In the United States, the US Air Transport Association, in addition to American Airlines, Continental and United Airlines, has initiated a legal challenge to the EU ETS on aviation, stating that it contravened the Chicago convention, the Kyoto protocol and the US-EU Open Skies Agreement and was contrary to principles of international of law. The US Secretary of State has written to the EU declaring that their actions are unilateral and saying:

… we strongly object on legal and policy grounds to the EU's plan to subject our operators to the EU's ETS. The EU is increasingly isolated on this issue.

So we have the two biggest players in the world, China and the United States, flatly and clearly rejecting this particular application of the EU Emissions Trading Scheme to extraterritorial activity. What we are saying to the Australian government is that we should take the same steps in a modest way by making it clear to the EU that we do not think their system is legal and, if they do not accept that, participating in any international challenge. (Time expired)

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I am not speaking in opposition to the private member's motion before this place, but not because it injects into the ongoing discussion or negotiations any new ideas or issues, or indeed any creative approaches. It simply iterates some of the state of play regarding the EU ETS and aviation, and it also calls upon the Australian government to take action—and a lot of the action in the private member's motion is action that has already been taken. Particularly, there is point (c)—I have some reservations about that which I shall address in my contribution today.

The private member's motion sets out some actions already taken, as I said, but it does so in scant form. The Australian government's actions in this regard through the responsible minister, the Minister for Infrastructure and Transport, Minister Albanese, are that it has undertaken robust advocacy that protects and promotes Australia's interests. I would expect no less from the responsible minister, Minister Albanese. Amongst other things, I would like to have on the record here that the Minister for Infrastructure and Transport met the EU climate change commissioner in Leipzig and made it very clear that Australia does not support the inclusion of international aviation in the EU ETS. Specifically, that was to do with Australia's interests.

Just by way of background to this issue—because it is an issue that the government and the minister are seized of and undertaking very robust advocacy on—the Australian government has made clear its opposition to the European Union's unilateral action on international aviation. It has made it very clear on a number of occasions and in a number of forums. The Australian government has done this through meetings and letters between respective Australian government and European Union ministers and through the Australia-European Union senior officials talks. Those talks are specifically on climate change, and this matter continues to be a matter of ongoing dialogue between Australia and the European Union.

The International Civil Aviation Organisation—ICAO, as it is referred to—is the key forum in which countries have been negotiating an agreement towards limiting emissions. At the most recent meeting of the organisation Australia made the Australian position on the European Union emission trading scheme and its application to the Australian airline industry very clear. They could not make it any clearer: the Australian government urged the European Union to hold off on their expansion of the European Union emissions trading scheme to international aviation. The Australian government also made it very clear and said, correctly, 'We want to work together with all ICAO members, including the European Union, towards a binding, global sectoral agreement for the industry.' The proposal was to do this, again correctly, through a market based mechanism.

Australia continues to support the development of a global approach to market based measures for international aviation. The Department of Infrastructure and Transport is working with a range of ICAO representatives to seek resolution of this issue. They include representatives from Brazil, Canada, Japan, Korea, Mexico, Nigeria, Singapore, the United Arab Emirates and the United States, as well as European and industry representatives. This position has been made clear in communications with the European Union since this meeting. Australia made it clear that the market based sectoral approach for this industry is the best approach and that the Australian government will continue to work towards this in negotiations that are ongoing this year. The honourable member for Flinders made his contribution just before me. I note that as recently as December last year the honourable member had this to say on global agreements on ABC24 Breakfast, 6 December 2011. He said:

In the interim what we are looking for is sectoral agreements. What does this mean? It means that you take a sector such as steel, cement or methanol and you try and get a common approach across the globe. You won't get 100 per cent but you might be able to get 80 per cent, and that is the way to get over the issue of boundaries and borders which has been a huge barrier to international action.

That is precisely what the government is doing in terms of the negotiations on this issue vis-a-vis aviation. On the government side they have been working constructively through the official channels, the appropriate channels, to make representations on behalf of Australian industries, and Australian industries are well informed, well briefed, on this matter. Australia in this area has to lead, not follow, and using ICAO not to sit on hands but to push for a more global approach. Australia has considered that to be more constructive than adding one more voice to the existing group of originally I think 26 nations opposing this particular European Union ETS.

Some other specific representations have been made. Senior Department of Climate Change and Energy Efficiency officials raised this issue at the Australia-European Union senior officials talks on climate change in Brussels on 27-28 February this year. This issue will be canvassed again at the forthcoming meeting on 4-5 June this year. There were letters from Ministers Albanese and Combet to the European Commissioner for Climate Change dated 25 January this year expressing very clearly the preference for an agreement with the ICAO. Australia's intervention to the International Civil Aviation Organisation council meeting in November 2011 was another representation where we were opposing the unilateral measures and proposing action as well in Australia. My information is that European officials have responded to Australia's constructive stance trying to do it through the appropriate body and channels and with sector agreement and have undertaken to work cooperatively with Australia through ICAO, and the issue will be canvassed again under a part of that 4-5 June meeting.

I would like to make a few other points. As I said, I am not speaking in opposition to the honourable member's motion, but it is a motion that iterates actions that have already been undertaken in this regard but in more scant form than what has happened with the advocacy of the Australian government. It also calls on the Australian government to undertake a range of actions that the Australian government has already undertaken, plus some. I have a reservation on point (2)(c), where it says 'join any international action'. 'Any international action' is very broad, calling upon the Australian government to commit to any international action, and I have to express my reservation at the broadness and the vagueness of that particular phraseology and say that the Australian government is committed to the ongoing advocacy through ICAO.

Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Link to this | Hansard source

The European Union emissions trading scheme operates on a sectoral approach, with different sectors being phased into the scheme over time since 2005. In August 2009 the EU announced that the nearly 4,000 commercial airlines, business jet operators and air forces from around the world that fly into and out of the EU would have to participate in their emissions trading scheme by January 2012. Failure to comply would see companies face fines of 100 euros per tonne of carbon dioxide emitted during a flight. As a last resort the EU could ban airlines from EU airports for noncompliance.

Their emissions trading scheme is levied on the carbon dioxide output from the fuel burnt on flights inbound to and outbound from EU ports not just over European airspace but, extraordinarily, to their first port of call outside of Europe. According to one consultancy firm, the total cost to airlines under the EU scheme will be 10.4 billion euros through to 2020.

Under the EU carbon tax, Qantas will be forced to pay an extra $2.3 million in 2012 alone and has already announced fare surcharges on travel to and from London and Frankfurt to cover this impost. Qantas has added a surcharge of $3.50 each way to a fare booked in Australia for Qantas flights to and from London and Frankfurt, and that surcharge will continue to rise. This is on top of Qantas' liability for the Australian carbon tax, which will affect their domestic services. Qantas has estimated that the Australian carbon tax will cost them between $100 million and $115 million in 2012-13 and will add between $1.82 and $686 to fares, depending on the sector's distance.

Similarly, Virgin's codeshare flights with Etihad will be affected, though only from Abu Dhabi to Europe, as customers bear the brunt of the EU ETS on aviation. The bill for new entrants to the European aviation market such as Jetstar or Virgin Australia will be much higher. Airlines that currently fly into the EU initially receiving a significant share of their carbon permits for free but new participants do not.

In enforcing this scheme the EU is taxing foreign airlines, including Qantas, for flying over non-European airspace. An Australian registered aircraft flying directly from Australia to Europe with an Australian crew and Australian passengers would be charged a European carbon tax for flying over Australian airspace. This is simply contrary to principles of international law and almost certainly in breach of a number of international conventions and open skies agreements.

The EU scheme has been most strongly opposed by most of the world's leading economies and has been opposed by most of the largest aviation nations outside of the EU. Earlier this year China banned its airlines from participating in the EU ETS. The Civil Aviation Administration of China notified all Chinese airlines that they cannot join the EU ETS or charge it to customers without government approval. The government of China has indicated that, if the EU does not back down, they will consider taking action to protect the 'rights of our nationals and our companies'.

It has been reported by Airbus's parent company EADS that in March China blocked purchases of Airbus planes worth US$12 billion in protest against the EU ETS. The USA air transport association, American Airlines, Continental Airlines and United Airlines initiated a legal challenge to the EU ETS on aviation, stating that it contravened the Chicago convention, the Kyoto protocol and the EU-US Open Skies Agreement and was contrary to principles of international law that stipulate each state has complete and exclusive sovereignty over the airspace of its territory.

In December 2011 the European Court of Justice in the EU rejected the USA's argument—one would wonder about their neutrality on an issue of this nature. After this decision the US Secretary of State wrote to the EU declaring their actions unilateral and saying that:

We strongly object on legal and policy grounds to the EU's plan to subject our operators to the EU's ETS. The EU is increasingly isolated on this issue.

Airlines for America has said:

… our member airlines continue to strongly oppose the application of the EU ETS to US airlines and continue to fight against it.

Earlier this year the US passed the Federal Aviation Administration Bill, calling on the government to use:

… all political, diplomatic, and legal tools at the disposal of the United States to ensure that the European Union's emissions trading scheme is not applied to aircraft registered by the United States or the operators of those aircraft …

More broadly, many countries have shown their strong and continuing opposition to the scheme, but Australia's weak, divided and paralysed government has barely uttered a whimper.

In September last year, 23 countries signed a declaration stating that the EU ETS was illegal and contravened the 1944 Chicago convention. Those nations included China, Brazil, Singapore, the UAE and the USA. Australia was not one of the signatories. Then, in November last year, 26 countries supported an International Civil Aviation Organisation working paper which was heavily critical of the EU ETS and urged the EU to refrain from including flights by non-EU members in their scheme. Where was Australia? Australia was one of only two non-EU nations from the International Civil Aviation Organisation not to sign the working paper.

Earlier this year, 23 countries concluded talks in Russia by signing a declaration which stated that they have a 'unanimous position that the EU and its member states must cease application of the EU ETS to airlines and aircraft operators'. The signatories included India, Japan, Brazil, Russia, Singapore and the USA. Those countries have indicated that they may consider drastic action including barring participation by airlines and aircraft operators in the EU, reviewing bilateral agreements and imposing additional levies or charges on EU operators as a form of countermeasure. Again, Australia failed to sign the agreement.

The Department of Infrastructure and Transport has stated that the government opposes the EU ETS and has made it clear in very senior representations to the European Commission and to European governments that Australia does not support the unilateral action of the European ETS to Australian airlines nor any unilateral action taken in that form. The government has said, and the member who spoke previously said, that Australia opposed the scheme, but we have not taken any action to try and stop it from happening. Presumably this is because this government is too embarrassed after imposing the world's biggest carbon tax. It has no credit from the European Union for imposing the world's biggest carbon tax on Australia. Our airlines are being taxed by the Europeans as well, even on some occasions when they are flying over Australian airspace. As I mentioned earlier, Australia was one of only two non-EU nations to not support the working paper opposing the EU ETS. Australia did not sign either of the declarations signed by dozens of countries opposing the EU ETS.

The motion that I have moved today reflects the wording of the act passed in the United States of America. It calls on the government to use all political, diplomatic and legal tools at their disposal to ensure that the EU's ETS is not applied to aircraft registered by Australia or to the operators of those aircraft. The motion also calls on the government to immediately assess whether the EU ETS is consistent with WTO agreements and to join any WTO challenge or any other proposed international action to prevent the application of the EU ETS to non-European airspace.

The House should support this motion to clearly state its opposition to the EU ETS and to stand up for our airlines. If it is good enough for the United States congress, why isn't it good enough for Australia? If the rest of the world's aviation community is crying out against this unjust and probably illegal tax, why does Australia remain mute? The Australian aviation industry is already struggling with a higher cost base than many of our international competitors, not to mention the imposition of the world's biggest carbon tax on its domestic operations. It is entitled to the support of its government as it fights against this iniquitous EU tax.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

My understanding is that the government does not oppose this motion. I have just listened to the Leader of the Nationals, who is the mover of the motion, arguing in favour of it. Being the mover of the motion he, obviously, would be expected to do that. But it seems to me, from listening to his contribution, that most of what he is asking of the government is already being done by the government, with the exception of perhaps signing certain international agreements that are currently being drawn up by other countries.

The motion is effectively saying this: the European Union has included within its emissions trading scheme a provision which forces international civil aviation carriers to be part of its emissions trading scheme. The motion also points out that there has been considerable opposition, by countries outside of the EU, to this proposition. My understanding is that the decision of the European Union dates back to October 2008 and at the time it was estimated to add between one and two euros to each passenger's flight. The Leader of the Nationals quite rightly points out that Qantas and Virgin in Australia have already factored in that additional cost in the order of $3.50 and $3 respectively. It is nothing new.

In recent times there has been considerable opposition by countries around the world to the inclusion of the aviation industry in the EU ETS. Australia too has made its opposition to this very clear. The member for Wide Bay says, 'What is Australia doing in respect to its opposition to this proposition?' The Australian government has for some time been in discussions with the EU on this very issue and has been doing it through a number of multinational forums. The ministers of the Australian government have met with EU counterparts and I understand that only recently the Australian government made its position very clear to the EU climate commissioner.

This is a matter that would be better resolved through negotiation than threats. The member for Wide Bay quite rightly referred to the Chinese response—they cancelled an aircraft order from Europe as a result. That is not the way our government believes matters should be negotiated. The different actions those countries have taken are interesting. Certainly, they are drawing up agreements or policy statements where they will oppose the introduction of the aircraft industry to the EU ETS, but they have not changed it. Taking a stance and protesting has not made a scrap of difference. It is our view that if you want to make a difference, go about it in a formal way.

It is also interesting that only last year the European Court of Justice rejected a legal complaint against the inclusion of the aviation industry into the EU ETS by American Airlines and other airline associations. They rejected it because it has obviously been very clearly and carefully drafted into their legislation, so going to the WTO is not necessarily going to be successful either. The success of this government seeking to have the decision of the European Union reversed or changed will come about through sensible dialogue between the EU and other countries. That is exactly the course that this government has taken, as it does in all international disputes.

The first thing we owe the countries we deal with is to sit down with them and go through the provisions of the issues that are in dispute and see how they can be best overcome. For the EU to have imposed ETS provisions on its aviation industry means it is something the EU believes in. It would be no different if this country made provisions that other countries differed with. If they do differ with them, talk to our government about it.

Bob Baldwin (Paterson, Liberal Party, Shadow Minister for Tourism) Share this | Link to this | Hansard source

I rise to speak in favour of this motion that calls on the Australian government to follow the United States in calling for aircraft registered by Australia or the operators of those aircraft to be excluded from the European Union's Emissions Trading Scheme. The coalition wants the government to pursue all avenues under World Trade Organisation agreements to test the legality of the scheme and join any other proposed international action to prevent the application of the EU ETS to non-European airspace.

The aviation industry has always been a challenging one. Sir Adam Thomson, the former boss of British Caledonian, once said:

A recession is when you have to tighten your belt; depression is when you have no belt to tighten. When you've lost your trousers—you're in the airline business.

In the past eight months we have seen the demise of Air Australia, while our national carrier grounded its entire fleet, announced further rationalisation after revealing its international division was losing over $200 million a year, and planned cuts in capital expenditure of $700 million. With IATA claiming the European system will cost airlines up to $1.23 billion this year, rising to $3.6 billion in 2020, global carriers such as Qantas need the EU's ETS like a rudderless aircraft.

As the shadow minister for tourism and regional development, I can understand that the tyranny of distance leads to the airline industry playing a vital role in bringing international visitors to our shores. Tourism expenditure, though, is mostly a discretionary spend. Making air travel more expensive will therefore have the effect of reducing the number of international visitors or cutting their expenditure in our country.

However, it is not just the potential effects that the EU's carbon tax will have on tourism that concern me. As Paul Kelly sang, 'From little things, big things grow.' When the global economy is growing, there is an impetus to grow the economic cake through the further liberalisation of trade. At times of economic uncertainty, as now, the tide flows in the other direction and the spectre of protectionism rears its ugly head. What might seem a little thing now has the potential to grow into a big thing by means of major trade conflict.

The introduction of the European Union's ETS system this year—in which 4,000 airlines will pay for the pollution they produce over the entire distance of each flight into and out of the EU—has already sparked negative reactions. Ten Chinese and Indian airlines have already refused to provide the EU with the necessary carbon emissions data. India has already threatened to ban European airlines from its airspace if Brussels sanctions Indian carriers for this refusal, with their environment minister calling the scheme a '"disguised" unilateral trade measure introduced under the name of climate change'. In March, there were claims that China was blocking Airbus aircraft orders for Chinese airlines worth $12.29 billion. Airbus said it was also seeing retaliation threats from 25 other countries. Russia has threatened to limit airlines from EU countries' use of air routes over Siberia and preference non-EU carriers instead. The US government has urged the EU to reconsider its current course or it will be compelled to take appropriate action.

Like the ill-conceived carbon tax here, the EU's ETS is not a way to reduce carbon emissions. It simply reduces the capital available to airlines, which Boeing's CEO said would 'prevent airlines from buying modern equipment that will reduce their environmental footprint'. The European Union has the right to make laws for flights within Europe. However, as the Director General of IATA stated, it does not have the right to pocket 'taxes for emissions by non-European carriers over the sovereign territory of non-European states.'

Any move to impose taxes without an agreement reached through the multilateral mechanisms of the International Civil Aviation Organisation needs to be opposed. Australia needs to stand with those nations in urging the EU to reconsider and avoid a trade war that Europe in its present economic situation can ill afford. I appreciate the government's embarrassment over proposing the world's biggest carbon tax, which Qantas has said will cost them $115 million and which will cost Virgin Australia $45 million in the first 12 months on their domestic operations. However, it should not be an excuse for continued inaction. They should vote for this motion to support our airlines and demonstrate this House's bipartisan opposition to the EU ETS.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

The government has made quite clear that we support the spirit of this motion on international aviation and emissions trading. We have made clear our opposition to the EU's unilateral action on international aviation on a number of occasions and in a number of fora. We have done that through meetings, through letters between the Australian government and EU ministers and through the Australia-EU senior officials talks on climate change.

The International Civil Aviation Organisation, ICAO, is the main forum through which countries negotiate an agreement on limiting emissions. We made our position very clear at the most recent meeting of that organisation: we asked the EU to hold off on their expansion of the EU ETS on international aviation. We want to work together with all ICAO members, including the EU, towards a binding sectoral agreement for the industry. And that is indeed the sensible approach to be taking on climate change and aviation.

We support a market based mechanism because we understand that it is the most efficient and effective way of reducing emissions and dealing with dangerous climate change. The Department of Infrastructure and Transport is working with a range of ICAO representatives to seek resolution of the issue. We are working with representatives of Brazil, Canada, Japan, Korea, Mexico, Nigeria, Singapore, the UAE and the US as well as European and industry representatives. That approach of working through ICAO is much better than whatever the member for Wide Bay means when he says in his motion at part 2(c) 'join any international action'. Our approach to climate change is a market based one, but it is one that also supports households.

It was my pleasure yesterday to host a morning tea for the Prime Minister and the Minister for Families, Housing, Community Services and Indigenous Affairs in Amaroo. At that morning tea was a group of Canberra pensioners: Estelle Griffin, Trish Roberts, Susan Cook, Pat Corbett, John and Kathy Bonnett, Janice and Fred Hodgson and Ada and Hank De Puit. It was an opportunity for those pensioners to hear first-hand from the Prime Minister and the minister for families and community services about how Labor is helping pensioners, about how we are ensuring that pensioners have household assistance that will not only allow them to deal with the modest price rises—0.7 per cent of the CPI—but also give them a buffer. Millions of Australian pensioners, even after accounting for the changes in costs that flow from the carbon price, even without changing their behaviour—none of our modelling assumes the behavioural change which we know is likely to take place—will still have a buffer.

I want to thank Gesima Olney, Joel Olney, Penny Hardy, Edie Terrell, Margaret Ryan and Lyndell Tutty for their hard work in putting together that morning tea, giving a valuable opportunity for Canberra pensioners to speak directly with the Prime Minister. The Prime Minister was asked directly about what will happen when costs go up and she responded by saying, 'Yes, it is true that there will be electricity price effects—not the 30 per cent that the opposition has been talking about but effects that we have modelled at around 10 per cent, around $3 a week for the typical household.

These increases in pensions and allowances, assistance that pensioners will see flowing into their bank accounts from today and over the coming weeks, will ensure that Australian pensioners are able to deal with the price changes that will flow from pricing carbon.' I know that so many Canberra pensioners are committed to putting a price on carbon pollution. They recognise, as do conservative governments in the UK and New Zealand, as did the Australia Liberal and National parties in the 2007 election and past that—up until the change of leadership in the Liberal Party—that putting a price on carbon pollution is the most efficient and effective way of dealing with dangerous climate change. And they recognise that the household assistance—half the money raised from the carbon price will go to household assistance—is the appropriate way of making sure that Australian households are able to deal with the modest price changes that will flow from carbon pricing. They know that, come 1 July, towns will not be wiped off the map, that price changes will not be catastrophic.

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.