The UK is Holding off on Selling EU Carbon Permits as the EU is Holding off Taxing other Countries for their Spending

Posted by PITHOCRATES - November 17th, 2012

Week in Review

The Eurozone is wallowing in a sovereign debt crisis that just won’t end.  Caused by spending obligations made during good economic times.  On the assumption that those good economic times would last forever.  But they created a lot of that economic activity with expansionary monetary policy.  Keeping interest rates artificially low.  By expanding the money supply.  Encouraging consumers and businesses to borrow and spend.  Which they did.  Leaving them with massive amounts of debt.  And inflation.  Which they fought the only way you can fight inflation.  By raising interest rates.  And contracting the money supply.  Or, in other words, with a recession.  Which reduces tax revenues.  Forcing governments to borrow more to pay for these ever expanding spending obligations.  Which led to rising borrowing costs.  And debt crises.  Leaving these Eurozone countries starving for cash.

Enter the Emissions Trading Scheme.  Making high energy uses buy permits to exhaust carbon.  Ostensibly to reduce global warming.  But really just a massive wealth transfer from the private sector to the public sector.  To help those countries with debt crises to pay for their ever expanding spending obligations without having to govern responsibly.  So they can continue to pander and buy votes and advance their liberal agendas.  But there has been some push back.  In particular from other nations flying into the European Union (EU) airspace who don’t want to subsidize the irresponsible governing of the EU countries.  Because of possible retaliation (like China threatening to cancel their Airbus orders for new airplanes) the European Commission is delaying the implementation of their airline emissions law (see Britain says it may review carbon permit auctions for airlines by Nina Chestney posted 11/12/2012 on Reuters).

The UK government will review its forthcoming auctions of European Union carbon permits for the aviation sector when it gets more details from the European Commission about its plan to delay the bloc’s airline emissions law, a minister said.

The UK plans to hold two auctions of around 3.5 million EU carbon permits for the aviation sector on November 26 and December 10…

The EU Commission said on Monday it will conditionally put on hold its rule that all airlines must pay for their carbon emissions for flights to and from EU airports.

Why is the UK reviewing their auction of carbon permits?  Because these permits are basically new taxes for the airlines.  That the airlines will pass on to their passengers.  Raising the cost of flying.  Which, in turn, will make some people forgo flying.  Hurting the airline industry.  Further exasperating a weak economy.

Of course those in the Eurozone rioting against austerity would love to see the EU go ahead with taxing other nations for flying into their airspace.  Because they don’t like austerity.  And would love to pass on their costs to other nations’ taxpayers.  Something other nations’ taxpayers are none too keen on.  So it’s a mess.  And the Emissions Trading Scheme only compounds the problem.  As it does nothing to address the source of the problem.  Excessive spending obligations that these nations cannot afford.

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