EU offers solution to China in row over aviation CO2

Sun Jun 5, 2011 3:52am EDT

* EU says Chinese airlines can apply for exemption from EU ETS

* Airline host nations need to take offsetting actions

By Pete Harrison

BRUSSELS, June 5 (Reuters) - The European Union has told Chinese airlines they can win an exemption from the EU's carbon market if they follow Europe's lead in cutting greenhouse gas emissions from aviation, according to a letter seen by Reuters on Sunday.

From Jan. 1 next year, the EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS), a system that forces polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap.

But China's aviation authority opposes the measure, saying it will cost Chinese airlines 800 million yuan ($123 million) in the first year and more than triple that by 2020. [ID:nLDE74919U]

China says that Europe should adjust the ETS to reflect the differences between rich and poor countries.

The issue has angered many airlines fearing higher costs and raising the spectre of a trade fight. The EU scheme covers aircraft emissions from the point of departure, a particular concern for non-EU long-haul carriers.

Many airlines prefer a global emissions market for aviation, rather than a fragmented system.

The row over inclusion of aviation emissions in the EU scheme is a major focus of the June 5-7 annual meeting of the International Air Transport Association in Singapore. The association is the aviation sector's main trade body.

The European Commission, which manages the ETS, wrote a letter to the China Air Transport Association last week offering a solution -- using provisions in the ETS rules to exempt the airlines of any country that can prove it is taking equivalent steps to cut emissions from aviation.

"The legislation contains provisions which enables the removal of all arriving flights from the scope the EU ETS in the event the third countries implement measures of their own to limit the climate change impact of these flights," said the letter to CATA, sent on May 31.

"The Commission is open to discussing further regarding measures that are being developed to limit the climate impacts of international flights departing China, with a view to these measures being considered equivalent."

U.S. airlines also oppose inclusion in the ETS, but some of Europe's biggest airlines say the move is preferable to leaving airlines out, which would make them vulnerable to different environmental taxes from national governments.

The U.S. industry group Air Transport Association of America is challenging the move in EU courts.

France, Germany and Britain in particular are trying to find a compromise with China, EU diplomats say.

The letter to CATA said the EU continued to work with two United Nations bodies, ICAO and UNFCCC, to reduce aviation emissions, but added: "Discussions in ICAO have been taking place for over 15 years and limited progress has been made."

(Editing by David Fogarty and Tim Hepher)

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