China raises stakes carbon emissions row with EU

BEIJING // China has raised the stakes in a dispute over the EU's carbon emissions levy on air travel by telling its carriers not to pay the fees.

The civil aviation administration of China said yesterday, via the state news agency Xinhua, that airlines must secure permission before they pay the levies or impose additional charges on passengers.

European officials yesterday insisted the dispute could be resolved through negotiations, potentially averting the risk of Chinese airlines being banned from the EU, an outcome a Chinese aviation industry official said was unlikely.

Any disruption of flights would be likely to cut the number of Chinese tourists visiting Europe, a scenario with potentially serious consequences given that visitors from the world's second-largest economy are now among the biggest spenders in the EU as it struggles to emerge from possible recession.

Over the recent Chinese New Year holiday period, Chinese tourists spent a record US$7.2 billion (Dh26.44bn) overseas, 46 per cent of which was in Europe, more than twice the figure for North America, according to a report released last week by the World Luxury Association. Under the carbon emissions scheme, which has also attracted criticism from the US, Russia and India, levies are applied to flights into or out of the EU as part of the 27-member bloc's wider carbon-trading system.

The surcharges came into effect at the start of this year but do not have to be paid until next year, with most flights this year covered by free credits. Once the scheme is fully introduced, however, airlines must buy or trade credits to cover services that leave or enter the EU.

As a developing country, China says it would be affected disproportionately by the charges.

"If they impose such taxes for the Chinese airlines, it will really affect business development. The same thing will be felt by other developing countries," said Clement Chow, a member of the Aviation Policy and Research Centre at the Chinese University of Hong Kong.

"Developing countries usually get more lenient treatment. You cannot just impose a one-size-fits-all treatment."

In a further sign of opposition, US airlines spearheaded a legal case against the charges in Europe, although this was rejected by a court in December.

The International Air Transport Association has said the annual cost of the scheme could be as much as €2.8 billion (Dh13.45bn) by 2020 and has called on the EU to hold talks with the International Civil Aviation Organization.

Markus Ederer, the EU ambassador to China, yesterday indicated a way out of the impasse, telling a news conference that countries that had equivalent measures to curb carbon emissions could gain exemption from the charges.

"We are ready to engage in a discussion on recognising the equivalent measures which would then exempt those airlines of those countries from the necessary dues that would have to be paid," he said.

The Xinhua report raised the prospect of retaliatory measures being imposed by China, saying the country would consider introducing "measures to protect the interests of Chinese individuals and companies".

Other analysts suggested an all-out trade war was unlikely. Chai Haibo, the vice president of the China Air Transport Association, told Bloomberg News he thought "all sides will negotiate and find a solution".

"I can't believe that the worst-case [scenario], such as the EU grounding Chinese flights, could happen," he said.

Gulf airlines have warned they would be hit particularly hard by the EU scheme as they say it affects growing airlines to a greater degree.

Last year Etihad Airways said it could have to pay as much as €500 million by 2020 as a result of the EU scheme.

Instead of particular countries or regions of the world imposing their own measures to try to limit carbon emissions by aviation, the airline industry has tended to advocate a global scheme.

While aviation is said to contribute only a few per cent of human-induced carbon emissions, with some reports putting the figure at 3 per cent, the figure is much higher in developed countries and is rising fast in some rapidly growing economies.

The Center for Climate and Energy Solutions, an environmental think tank based in Virginia, US, has said improvements in the efficiency of aircraft are being entirely offset by the growth in air travel worldwide.

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