Airlines snub emissions plan after Treasury doubles duty

Tax hike leads to shelving of flagship scheme to cut greenhouse gases and sparks row between ministers

A tax raid by the Chancellor, Gordon Brown, on UK airlines has ruined a flagship government scheme to reduce the industry's carbon emissions.

British Airways, Virgin Atlantic and easyJet have pulled out of the scheme, put forward by the Department of Environment, Food and Rural Affairs (Defra), in protest at the doubling of air passenger duty, imposed by Mr Brown in his pre-Budget report last week.

Defra has been forced to cancel tomorrow's planned launch of a consultation for the scheme. A spokesman could not say when the plans would be resurrected.

The department wants to introduce a voluntary code for business, under which companies will offset their carbon emissions by investing in clean energy projects such as wind farms. The code would regulate businesses not covered by the European Emissions Trading Scheme - these could include retailers, for example, as well as airlines.

Officials raised the proposals last month and asked the Association of British Travel Agents to host tomorrow's launch alongside senior airline executives. The cancellation of the launch will trigger a furious row between Defra, headed by David Miliband, and the Treasury.

A few UK airlines had voiced reservations about Defra's plan before the pre-Budget report. A spokesman for one big carrier, who did not want to be named, complained that it was a "one-size-fits-all" code, and should have made allowances for the fact that it is harder to reduce an aeroplane's emissions than those of, for example, a shop.

But airlines - which do not pay fuel tax and are under pressure to participate in the European scheme - were still broadly supportive until the Chancellor pounced.

Mr Brown doubled the duty per passenger, raising it to £10 on economy-class, short-haul flights and £40 on long-haul flights. But the airlines, which were not consulted, say they cannot be expected to pay this tax, an estimated £1bn annually, as well as the cost of Defra's scheme.

An easyJet spokesman said: "We were looking to join up with Defra on this. But we are disappointed with the mixed signals we have had from the Government over the last few days."

It is understood that BA did not commit to the scheme, and has now decided to rule it out.

A Virgin Atlantic spokesman said: "We question the validity of such a scheme in the current atmosphere of higher taxation and the need to find technological solutions to reduce emissions."