Beijing mulls retaliatory moves over EU carbon tax

Beijing will launch trade sanctions and prohibit mainland carriers from joining the European Union's emissions trading scheme, which came into effect on Sunday. It says the EU's move to include global airlines in the scheme is illegal.

Under the scheme, all airlines flying to and from Europe face levies on their carbon emissions. The levies will be charged based on the entire length of a flight.

The Civil Aviation Administration of China (CAAC), the regulatory agency, is considering measures to fight the emissions scheme, including banning mainland carriers from participating in it, an official said.

'Various government departments are formulating retaliatory measures at the request of the China Air Transport Association and mainland airlines,' said Cai Haibo, a deputy secretary-general of the association, which represents Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines.

The US House of Representatives has passed a bill prohibiting US carriers from participating in the scheme. It awaits approval by the Senate.

Niels Ladefoged, who is responsible for the scheme under the office of the commissioner for climate action, said there was a 'clear requirement for airlines' to comply and there were also 'clear penalties' for any failure to comply.

Ladefoged would not directly comment on the threat of retaliation by China or other countries, but said: 'We are not aware of any major issue of non-compliance.' He said that while airlines were fully entitled to take legal action, 'we are confident with the legality of the scheme'.

Ladefoged said US carrier Delta Air Lines had added US$3 to the cost of fares to cover its emissions commitment.

Carriers which refused to pay for their carbon emissions might risk losing their landing rights at European airports, said Gabriel Sanchez, a senior fellow at the International Aviation Law Institute at DePaul University in the US.

Airlines are to start making payments under the emissions scheme in 2013, which provides some lead time for Beijing to move to force the EU to delay or withdraw the plan, the CAAC official said. One option was to stop buying aircraft from European planemaker Airbus.

'It is the most effective way to deter [the] European scheme,' he said. France and Germany, the two major shareholders of Airbus, are cornerstone members of the EU.

But the CAAC official said Beijing had yet to decide whether it was viable to launch trade sanctions against the EU.

India is considering asking airlines to withhold emissions data from the EU to scupper the scheme, a civil aviation official was quoted as saying by Bloomberg yesterday. But the plan has not been finalised on concerns about the possible impact on transportation.

Cathay Pacific Airways said it had not decided when to start charging passengers for the emissions scheme. A spokeswoman said yesterday a HK$50 charge mentioned by chief executive John Slosar last year was merely indicative.