June 5, 2011 / 10:32 AM / in 7 years

EU must be "firm" in aviation CO2 dispute with China

BRUSSELS (Reuters) - Europe’s climate chief struck a defiant note in an escalating row over moves to make airlines pay for carbon pollution, saying Brussels would not cave in to threats of trade retaliation.

From January 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.

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.

Industry and diplomatic sources have said China threatened retaliation against European airlines and French planemaker Airbus if the EU goes ahead with its plans.

“When some parties start to threaten specific European companies, I think Europe should be very firm,” Climate Commissioner Connie Hedegaard told Reuters in an interview.

“Now is not the time to get nervous over legislation that has already been agreed,” she added. “This was agreed by all 27 EU member states, by the European Parliament and by the European Commission.”

The aviation industry is worried the dispute will result in trade conflict and retaliatory measures, both from China and the United States, which has also voiced its opposition.

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

The row over inclusion of aviation emissions in the EU scheme is likely to flare up at the June 5-7 annual meeting of the International Air Transport Association in Singapore. The association is the aviation sector’s main trade body.

Hedegaard said it was vital to act on aviation emissions after years of rhetoric from the industry, but little action. “We cannot accept a global sector that says -- let’s wait for another 5 or 10 years, because we still can’t reach an agreement.”

Having taken the decision to act, Europe must now apply its laws evenly across all airlines using European airspace, regardless of their origin.

She also noted that the cost of emissions permits translated to around 8 euros ($11.70) per passenger on an international flight, a small amount compared to some airport taxes, such as New York at around $16.

“It’s very important we do not just target European companies with the ETS,” she said. “And why should a Chinese businessman be exempt on a flight from Beijing... if a European student flying from Scotland to Germany to visit their parents is not?” she said.

She also held out the offer of a compromise -- a provision in the laws that allows Europe to exempt airlines from countries that are taking “equivalent” steps to curb greenhouse gases from aviation.

“If you have equivalent measures of your own, you can be exempted,” she said. “We can see in the Chinese press that they’re working on that. We’re looking at that to see -- is that what we can call an equivalent measure?”

The European Union has told Chinese airlines they can win an exemption from the EU’s carbon market if China takes carbon-cutting steps from aviation, according to a letter seen by Reuters on Sunday.

Editing by David Fogarty

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