Economics Ib Ia Example

Topics: Externality, Greenhouse gas, Market failure Pages: 4 (1270 words) Published: March 14, 2013
Original Article

Airlines, Emissions and Europe’s Sensible Plan
Published: February 26, 2012

The carbon dioxide from airplanes accounts for about 3 percent of the world’s greenhouse gas emissions, a share projected to go up as air traffic rises. The European Union is now requiring airlines that fly into or out of Europe to pay a fee for these emissions. This is a smart response to an urgent problem. The United States and the other nations opposing the program should either come up with a better idea — soon — or drop their objections. Under the scheme, essentially a cap-and-trade system, airlines will be given an emissions ceiling and allocated permits. They will have to buy new permits only if they exceed the ceiling. This will put a premium on operating more efficiently. And Europe’s hope is that it will avert any increase in emissions and lead to a modest drop, beginning with a 3 percent cut this year compared with a 2004-6 baseline. The United States, Russia, China and 20 other nations opposed to the plan met in Moscow last week to plot a response. Though no specific actions were agreed, there was much belligerent talk, and even a list of possible retaliatory actions, including levies on European-based airlines that fly internationally. Russia suggested that it might withdraw permissions for European airlines to fly over Siberia on routes from Europe to Asia. For the sake of their own financial survival, many airlines are trying to become more efficient. But like the power industries, many of which have vociferously resisted cap and trade, they want to change on their own schedule, and without the threat of penalties. Governments are clearly listening to their airlines. Many, notably Russia and China, also bristle at what they see as an insult to their sovereignty. The Obama administration says it would prefer a global agreement under United Nations auspices. That would be great. But Europe argues, with some justification that talks aimed at...
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