Economy

EU airline measure flies into turbulence

By Xin Dingding (China Daily)
Updated: 2011-06-07 07:03

SINGAPORE - China will not comply with EU demands asking Chinese airlines to follow Europe's lead in cutting greenhouse gas emissions by joining a carbon trading system, and will take legal action at a future date against the plan, a senior official with China's top aviation industry body said on Monday.

Chai Haibo, deputy secretary-general of the China Air Transport Association (CATA), told China Daily that the EU plan to unilaterally force countries into the Emissions Trading Scheme (ETS) is "radically unreasonable", and his association is not going to join it or apply for an exemption.

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Chai made the remarks on the sidelines of the International Air Transport Association's (IATA) three-day annual general meeting in Singapore that began on Sunday.

The EU will require all airlines flying to Europe from Jan 1 to be included in the ETS, a system that compels polluters to buy permits for each ton of carbon dioxide they emit above a certain cap. Those who do not join the system will face punishment including fines and flight suspensions.

But if Chinese airlines agreed to participate in the plan they would have to pay about 800 million yuan ($123 million) to the EU in 2012 and face a bill of more than 3 billion yuan in 2020. The total amount over the next nine years is estimated to reach 17.6 billion yuan, according to the industry's calculations.

After months of negotiations, the European Commission, which administers the ETS, said in a written reply to the CATA on May 31 that governments could apply for an exemption if they take what are called equivalent measures to curb aviation emissions.

Such an exemption would reduce the carbon costs for flights entering Europe (flights leaving Europe are not included), but details have yet to be spelt out.

"China will not join the EU's carbon trading scheme, despite the consequences, and the CATA will fully support legal action against the EU's plan," Chai said.

He said the CATA and Air China, the country's flag carrier, will jointly file a lawsuit against the plan in Germany, but the time of that action has not yet been decided.

Besides China, the US industry group, the Air Transport Association of America, is also challenging the move in EU courts.

Airlines from other developing countries have also filed lawsuits or are ready to take legal action and the IATA has agreed to offer legal assistance if asked, Chai said.

Cheng Shuaihua, a program officer at the Geneva-based International Center for Trade and Sustainable Development, said that the lawsuits have a good chance of success as the EU decision goes against the principle of "common but differentiated responsibilities" for developing and developed countries in climate-related negotiations.

Chinese airlines should also examine if the EU scheme violates existing bilateral agreements on open skies, as well as rules set by the World Trade Organization, Cheng said.

China can use the legal challenge against the EU as a bargaining chip to find a solution, he said.

The IATA has heavily criticized the EU plan.

Giovanni Bisignani, director-general and CEO of the IATA, criticized the EU on Monday for ignoring international law by going ahead with the carbon trading scheme, and said such uncoordinated, punitive measures would undermine global efforts for development and disrupt aviation markets.

He called it "a $1.5 billion cash grab that would do nothing to reduce emissions".

Chai said that the CATA believed that the EU should take more direct measures, such as setting up emission standards for airplane makers to improve engines and reduce emissions.

"When they (the EU) tried to reduce emissions by cars, they adopted emission standards that carmakers had to follow. Engines were improved and cars met the standards. Car users were not supposed to pay," Chai said. "It should be the same in the case of aviation. But now they are asking flight operators (users) to pay for it."

The EU measure, which produces no direct emission reductions, is planning to set the cap based on emission data from 2006, which is "unfair" to airlines from developing countries and takes no account of the rapid development in recent years, Chai said.

The increase in costs for airlines from developing countries will be much more than for those from developed countries, he said. And the cost is likely to skyrocket to "an uncontrollable, dangerous level".

At present, it costs airlines 15 euros to buy permits for each ton of carbon dioxide they emit above a certain cap.

"But in the future when some countries need to buy a lot of permits it is possible that the price for each ton of carbon dioxide (emitted above the cap) could soar to 20, 30 or even 150 euros," Chai said. "This is dangerous, and it could be financial manipulation."

China has set a target to reduce carbon emissions per unit of GDP by 40 to 45 percent from 2005 levels by 2020. As part of that move, the country's aviation regulator asked all airline carriers to cut energy and carbon intensity by 22 percent during the same period.

In China, 33 airlines from the mainland, Hong Kong and Macao special administrative regions are included in the list of airlines expected to participate in the EU plan. At least 16 Chinese airlines have the rights to fly to Europe, with 11 operating regular services.

Among the most affected will be Air China, China Southern Airlines and China Eastern Airlines.

Li Jing in Beijing contributed to this story.