China Bans Airlines From Joining EU ETS

February 6, 2012

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The Chinese government said on Monday it has barred the country's airlines from joining a European Union scheme to charge for carbon emissions from flights into and out of Europe and prohibit airlines from charging customers extra because of the EU plan.

The hardening of the dispute, which comes a week before Chinese and EU leaders hold a summit next week, could potentially subject Chinese airlines to fines or prohibitions on use of EU airports.

The aviation row also comes as eurozone countries have looked to China, with its big holdings of foreign exchange reserves, for a show of economic support while they grapple with the latest phase of their debt crisis.

The announcement from the central government's State Council, or cabinet, bolstered China's opposition to the plan -- intended to help curb greenhouse gases from aviation that are adding to global warming.

It said Chinese airlines would need approval if they want to join in the EU airlines emissions plan, which Beijing has already denounced as an unfair trade barrier.

"China hopes Europe will act in the light of the broader issues of responding to global climate change, the sustainable development of international aviation and Sino-European ties, strengthening communication and coordination to find an appropriate solution acceptable to both sides," an unnamed official from China's civil aviation authority said, according to the announcement, issued by the official Xinhua news agency.

The official also issued an opaque warning about additional consequences.

"As well, the Chinese side will also consider taking necessary measures to protect the interest of the Chinese public and businesses based on developments," said the official.

From January 1, all airlines using EU airports have been brought into the EU's Emissions Trading Scheme (ETS), alongside EU utilities and heavy industry.

Any airlines that do not comply face fines of EUR€100 (USD$130.5) for each tonne of carbon dioxide emitted for which they have not surrendered allowances. In the case of persistent offenders, the EU has the right to ban airlines from its airports.

Late last year, the European Court of Justice ruled against a group of US airlines that challenged the European law requiring a carbon cap on all airlines flying to and from European Union airports.

In December, too, the China Air Transport Association (CATA) urged China's airlines to refuse to take part in the emissions scheme.

CATA says the scheme would cost Chinese airlines CNY800 million yuan (USD$123 million) in the first year and more than three times that by 2020.

EU Climate Commissioner Connie Hedegaard has repeatedly said she is open to talks with other nations and that the EU law provides for "equivalent measures". Those could be other forms of carbon reduction, rather than the purchase of permits under the EU scheme.