Flying into turbulence

Passengers flying to and from Europe face higher fares from next year, and anyone flying to Hong Kong or elsewhere in Asia will pay sharply more than those staying within Europe or going to the Middle East, thanks to new rules from the European Union in pursuit of an oxymoron - making air travel environmentally friendly.

Unless there is an unlikely change of heart by Eurocrats and their political bosses or a legal hitch or a last-minute political deal, the EU will begin imposing its complex new charges on carbon dioxide emissions from January. Long-haul costs per passenger may be as much as US$300 per ticket. The scheme may cost airlines Euro2.5 billion (HK$27.6 billion) next year, rising to Euro20 billion by 2020, more than enough to wipe out all the profits of all the world's airlines. This year, airlines predict combined profits of US$4 billion.

There has been an outcry from outside Europe. The US Air Transport Association went to the European Court of Justice this month arguing that the inclusion of non-EU airlines in the emissions trading scheme (ETS) is illegal. The EU responds that its action is in accordance with the Chicago Convention, the principal treaty governing global civil aviation, which requires non-discrimination, meaning that all airlines be treated the same, irrespective of nationality.

John Slosar, chief executive of Cathay Pacific Airways, laments that the ETS 'has the right intentions but is taking the wrong approach. Aviation is by its very nature a global industry, so for this reason we believe a global approach, not a regional one, is needed for any emissions scheme.'

China reacted angrily, citing 'common but differentiate responsibility' under the UN Framework Convention on Climate Change, stating that developed counties have a duty to take action first. Beijing threatened that it might resort to a trade war, including not buying aircraft from Airbus. Hong Kong Airlines was expected to announce the purchase of 10 A380 aircraft at the Paris Air Show last month, but no such deal was struck, reportedly because of China's opposition to the ETS.

Europe is prepared to call China's bluff. Connie Hedegaard, the EU climate chief, told The Guardian last month that she was 'standing firm' on the plans. 'This is our legislation, adopted unanimously. This is the first time China has mentioned a trade war and retaliation. If Europe immediately backtracks what would that look like? If someone says boo, we do not change our laws.'