China aviation industry chief backs legal action on EU CO2 scheme

SINGAPORE Mon Jun 6, 2011 6:05am EDT

Paramilitary guards stand on the tarmac as a China Eastern Airlines Airbus A330-300 plane taxis along a runway at Beijing's capital airport May 26, 2011. REUTERS/David Gray

Paramilitary guards stand on the tarmac as a China Eastern Airlines Airbus A330-300 plane taxis along a runway at Beijing's capital airport May 26, 2011.

Credit: Reuters/David Gray

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SINGAPORE (Reuters) - China's top aviation industry body ramped up pressure on the European Union on Monday, saying it would give full support to legal action against the forced entry of airlines into the EU's carbon trading scheme.

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

But China has resisted, saying the scheme is unfair for developing countries and costly.

China Air Transport Association CATA.L says the scheme will cost Chinese airlines 800 million yuan in the first year and more than triple that by 2020.

The European Commission, which administers the ETS, says governments can apply for an exemption if they take what are called equivalent measures to curb aviation emissions but hasn't spelled out what measures would be acceptable.

Such an exemption would reduce the carbon costs for an airline flying to Europe.

Wei Zhenzhong, CATA's Secretary-General, told Reuters that he didn't believe applying for an exemption was a solution.

He said the EU's unilateral behaviour by forcing non-EU airlines to comply with the ETS was "inappropriate in content and the way they have done it".

At least 16 Chinese airlines have the rights to fly to Europe, with 11 actually operating regular services. Among the most affected will be Air China (0753.HK) (601111.SS), China Southern Airlines (600029.SS) (1055.HK) and China Eastern (600115.SS) (0670.HK).

"I believe we have to take legal action," Wei said, adding Air China was preparing to launch a legal challenge. The U.S. industry group Air Transport Association of America is challenging the move in EU courts.

The European Union's step to include aviation into the bloc's $120 billion trading scheme has been deeply unpopular among global airlines, which have said the move is costly, illegal and particularly unfair on long-haul carriers.

Non-EU carriers will have to pay carbon costs based on the entire journey, something that angers Asian airlines in particular because of the long distances to Europe.

While the scheme will be allocating about 80 percent of pollution permits for free to reduce costs, most of the remainder have to be bought from the market.

Wei said the door for negotiations with the EU has not yet closed and that senior Commission officials will travel to China soon. But failure to agree on a solution could lead to a trade war, he added.

(Writing David Fogarty; Editing by Raju Gopalakrishnan)

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