Tharman warns against short sighted environmental taxes

Iata AGM told to guard against actions that can lead to unintended market distortions
Ven Sreenivasan Business Times 7 Jun 11;

(SINGAPORE) Unilateral and uncoordinated environmental initiatives which impose costs via punitive taxes on other parties would be short-sighted and create market distortions.

Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said this in his welcome address at the 67th Annual General Meeting of the International Air Transport Association (Iata) yesterday.

Speaking to some 700 delegates at Marina Bay Sands, Mr Tharman noted that the most important strategic response of governments and industry to environmental challenges was to work together to remove measures and practices that impede fair competition.

Mr Tharman's remarks were read by many delegates as a veiled reference to the European Union's decision to impose emissions tax on global carriers flying into its air space from 2012.

'We should also guard against well-intended actions that can lead to unintended market distortions,' said Mr Tharman, who is also Minister for Manpower. 'To take just one example, in addressing climate change, we should harmonise measures at an international level so as to ensure a level playing field for all, as well as minimise multiple cost layers from unilateral localised emissions trading schemes and environmental taxes. Such coordinated efforts will ultimately yield more efficient outcomes for all stakeholders and allow the industry to grow in an environmentally sustainable manner.'

The EU's emissions trading system or ETS would allocate pre-determined baseline annual emission credits to airlines, but charge them for additional credits for any emissions which exceed the allowable amount.

Iata estimates that airlines will have to cough-up excess of US$1.5 billion for these credits.

Mr Tharman said that the Singapore Government was committed to providing an environment with minimal regulatory and cost burdens on airlines to enable the industry to remain cost-efficient and grow.

'We are also committed to avoiding and removing market barriers. This is reflected in our pursuit of a liberal aviation policy, such as in concluding bilateral Open Skies Agreements with over 40 countries to date. At the multilateral level, we have also worked closely with our Asean partners to bring about air services liberalisation within the region, as well as with Asean's key dialogue partners such as China and India.'

The Singapore Government is also seeking to foster a supportive environment for innovations in international transport, he added. He cited the example of the close consultations to develop provisional rules for the first ultra-long range flights in the form of non-stop connections between Singapore and points in North America in 2004.

'The pilots' association, airline management and the Civil Aviation Authority of Singapore (CAAS) were deeply involved, guided by a scientific approach and assisted by other aviation authorities and scientific agencies,' he said. 'These rules have gone on to shape international standards on flight time limitations for air crew.'