Russia could block airlines from emission trading

MOSCOW Mon Feb 20, 2012 12:05pm EST

MOSCOW (Reuters) - Russia may prohibit its airlines from carbon emission trading in protest against a European Union law it says is unfair, state carrier Aeroflot (AFLT.MM) said on Monday.

A group of nations will gather in Moscow this week to debate possible retaliation to the law, which raises the risk of a trade war by forcing all airlines to pay for their carbon emissions.

"The Russian government is now reviewing a bill prohibiting Russian airlines to participate in emission trading: it means considering a retaliatory approach," Aeroflot told Reuters on the eve of the talks.

"We are facing a new initiative by the EU that may trigger real 'trade wars' and cause damage to the world airline industry at one of its most critical stages," the airline added.

The new law obliges global airlines to pay for emissions when using EU airports as of January 1 this year, a measure it says will reduce carbon output and help protect the environment.

But the non-EU opposition, which includes India, China and the United States and is known as the 'coalition of the unwilling', says the industry developments of cleaner fuel and more fuel-efficient aircraft are enough to lower emissions.

China has already barred its airlines from taking part in the scheme unless they receive explicit government approval to do so.

TRADE WARS

Aeroflot said the law could cost it 800 million euros by 2025. It warned that the opposition could change its approach from "oral protestations" to "various forms of trade wars with the EU".

These could include both restrictions of European airlines in Russian airspace and the adoption of unilateral emission trading schemes of its own, the airline added.

EU and Russian sources have indicated that no one wants the dispute to go that far, and the Russian transport ministry has said that a decision should be made by the United Nation's International Civil Aviation Organisation ICAO.L.

Aeroflot, around 53 percent owned by the Russian government, said it agreed that ideally ICAO was best placed to resolve the potential crisis.

"Aviation authorities of non-EU countries through joint efforts need to prepare an ICAO resolution with regard to the development of a global framework for greenhouse gases emissions reduction," it said.

(Editing by Jane Baird)

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