China denounces EU airline carbon law, seeks talks

BEIJING/HONG KONG (Reuters) - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.

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 100 euros ($128) 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.

“China opposes the European Union’s unilateral legislation. China has expressed to the EU our deep concern and opposition many times on a bilateral level,” Foreign Ministry spokesman Hong Lei said.

“We hope the EU can take careful precautions with a cautious and practical attitude, and regarding those aspects involving China, appropriately discuss and handle this matter,” Hong told reporters during a regular briefing.

The EU’s carbon trading scheme was launched in 2005 as one of the pillars of Europe’s efforts to combat climate change.

Following a December ruling from Europe’s highest court that inclusion of airlines in the ETS was valid, China’s official Xinhua news agency warned of a trade war.

Spokesman Hong said other countries had taken an equally negative view.

The United States has also raised the prospect of retaliation, while a draft law in the U.S. Congress proposes to make it illegal to comply with the EU law.

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.

“It has to be something similar,” Isaac Valero-Ladron, EU spokesman for climate action, told reporters in Brussels on Thursday. “It’s a measure which a country feels most comfortable with.”

But he insisted the EU would stand by its legislation, which it adopted after more than a decade of debate at the U.N.’s International Civil Aviation Organization failed to deliver a global solution to aviation emissions.

“We’re not modifying our law and we’re not backing down,” Valero-Ladron said. “We’re confident the companies will comply. The penalties for non-compliance are much higher (than complying).”


Cai Haibo, deputy secretary-general of the China Air Transport Association (CATA), told Reuters on Wednesday China would not cooperate with the EU on the scheme.

“If governments like the U.S., China and Russia can launch strong and forceful retaliatory measures, this will form enormous pressure we hope could make the EU turn its head,” he said.

CATA represents the country’s four major airlines: flag-carrier Air China Ltd, China Southern Airlines, China Eastern Airlines and Hainan Airlines.

The association estimates the scheme will cost Chinese airlines 800 million yuan ($123 million) in the first year and more than triple that by 2020.

The European Commission has assessed the impact on air fares at 2 to 12 euros per passenger. For airlines, the cost is gradual as 85 percent of carbon allowances are handed out for free this year and bills would be due only next year after emissions are calculated.

Kelvin Lau, a Hong Kong-based airlines analyst at Daiwa Securities, said the Chinese airlines statement could be a tactic but that it might not succeed.

“It is still in a negotiation phase, and maybe it’s just a political gesture for Chinese airlines to say they won’t pay -- showing that China strongly opposes the rule,” Lau said. “But it may not work as this is a law with legislative power and the EU would not easily let go.”

Additional reporting by Barbara Lewis in Brussels; Editing by Robert Birsel and Jane Baird