Chinese airlines refuse to pay EU carbon tax

The 4 main Chinese airlines, Air China, China Southern Airlines, China Eastern Airlines and Hainan Airlines, which fly millions of passengers to Europe each year, have said they will not pay the ETS charges. This might lead to a ban from European airports.  There are warnings of a trade war, and it has been suggested that China’s airlines should counter by reducing purchases of Airbus aircraft. The ETS costs expanding airlines more than those not expanding.  China says it is still at the stage of rapid expansion of their airline industries and so find it difficult to cut overall emissions.

Airlines ponder legal challenge to carbon emissions scheme, while Chinese government may resort to ‘retaliatory measures’

4.1.2012 (Guardian)

China‘s four leading airlines have thrown down the gauntlet to the European Union by saying they will refuse to pay carbon charges levied under Europe’s emissions trading scheme.

The defiant message — which could lead to a ban from European airports — marks an escalation of resistance to the scheme, which came into effect this week and is also fiercely opposed by the United States.

Despite the growing threat of a trade war, Europe sees the cap-and-trade system for aviation emissions as a crucial tool for reducing greenhouse gases that contribute to climate change.

From 1 January, any airline using an airport in the EU is obliged to participate. But China’s leading aviation body said it will not. “China will not cooperate with the European Union on the ETS, so Chinese airlines will not impose surcharges on customers relating to the emissions tax,” said Cai Haibo, deputy secretary-general of the China Air Transport Association.

His organisation represents Air China, China Southern Airlines, China Eastern Airlines and Hainan Airlines, which fly millions of passengers to Europe each year. It estimates that the scheme will cost its members 800m yuan (£78m) in the first year, rising more than threefold by the end of the decade.

Under EU regulations, airlines that fail to pay carbon allowances can be fined €100 per tonne of carbon dioxide. Persistent offenders are liable to be banned.

Last month, the European court of justice turned down a legal challenge to the scheme, prompting China’s Xinhua news agency to warn of a looming trade war.

If the EU applies punitive measures, Chinese academics have suggested that the country’s airlines should counter by reducing purchases of Airbus aircraft.

While such threats have since been played down, any escalation of conflict between these two huge economies would have implications for the world.

China says it is unreasonable for Europe to apply its policies to developing nations, which are still at the stage of rapid expansion of their airline industries and so find it difficult to cut overall emissions.

It says the costs of reducing carbon should be passed on to aircraft manufacturers — most of which are in Europe or the US — as an incentive for them to produce more efficient planes.

There is still time for a resolution because carbon fees do not have to be paid until March 2013. But Chinese airlines are already looking into legal actions against the EU and lobbying for countermeasures by the Chinese government.

“We are now walking on two legs — first, we would not rule out the chance of taking legal action and, second, to resort to the government for retaliatory measures. Several departments have been looking into this,” Cai said.

China is not alone in its opposition. The US has also warned that it may retaliate and US Congressmen have drafted a bill that would make it illegal to comply with the EU policy. Qantas Airways of Australia has threatened to sue.

But other Asian airlines were more amenable to the system. Cathay Pacific — which is based in Hong Kong — and Singapore Airlines have said they would either offset the costs by improving efficiency or pass on the charge to customers.

The EU says the scheme would cost passengers between €2 and €12 per flight, depending on the distance and other factors. Airline operators fears this will hurt demand in a market that is already depressed by the economic crisis.

see also

Fears of trade war after Chinese airlines ‘refuse’ to pay ETS

Date added: January 6, 2012

While the system was introduced this month, airlines won’t have to start paying the tax until the first quarter of 2013 giving them time to take responsive action. The China Air Transport Association says Chinese airlines will not impose surcharges on customers relating to the emissions tax. The EU legally has the option of enforcing fines of €100 for each tonne of CO2 emitted for which airlines have not surrendered a carbon allowance. The Assoc of Asia Pacific Airlines said various governments around the world opposed to the EU ETS are now evaluating what sanctions can be taken against the EU with the likelihood of a trade war ahead, which would not achieve any environmental benefit. Delta has already increased its fares to Europe by €3. Cathay said the ETS would add about $6.44 to a ticket between Hong Kong and Europe.

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 Aviation joining ETS not likely to increase air fares any time soon

Date added: January 3, 2012

The Telegraph, which has long campaigned against taxes on aviation or anything that increases the price of flying, complains about the recent entry of aviation into the EU ETS. And how it will increase the cost of flying …. in 10 years time…. The price of carbon is now very low – at about €7 – 8 per tonne of carbon, making permits cheap. Increases in fares will not happen till 2013. Many airlines will not pass on the extra price to their customers, as demand is weak at present due to the recession. Airlines get 85% of their allowances free in the first year, and between 2013 and 2020, airlines will get 82% of the permits for free, with 15% auctioned to meet additional needs and 3% set aside for new entrants to the scheme.

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see also earlier news:

Airlines to enter emissions trading scheme from 1st January 2012

Date added: December 31, 2011

On 1st January, aviation joins the European Emissions Trading Scheme (ETS). Airlines will have to obtain carbon credits for all carbon emitted during flights into and out of Europe. This could save around 183 million tonnes of CO2 each year by 2020. Passengers could expect between €0.5 and just under €3 to be added to ticket prices as a direct consequence of the ETS and easyJet said the cost would be about 30 – 50p per passenger for flights within Europe. Permits do not need to actually be handed over till 2013. In practice airlines are getting 85% of the permits they need in the first year free, so they are in a good position to make windfall profits out of them scheme. Airlines are trying to make out that they are already being charged an environmental tax, in APD. But APD is not seen by the government as being an environmental tax. Air passengers are therefore not being charged twice for their travel carbon emissions.   Click here to view full story…

EU airline carbon tax (Emissions Trading System) backed by European Court

Date added: December 21, 2011

EU plans to levy an emissions tax on airlines are valid, according to the European Court of Justice. The decision means all airlines flying to and from the 27 states of the EU will face a tax on emissions from 1 January. US, Canadian and other carriers argue the charges violate climate change and aviation pacts but the ECJ ruled that the ETS does not infringe the principles of customary international law at issue or the Open Skies Agreement. Airlines can choose whether to fly to EU countries, or not. The US House of Representatives passed a measure two months ago directing the US transport secretary to prohibit US carriers from participating in the scheme if it were to come into force.   Click here to view full story…


Date added: December 21, 2011

A transatlantic coalition of environmental groups today applauded the decision of Europe’s highest court to uphold the EU law to reduce carbon pollution from airplanes. The decision, from the Court of Justice of the European Union, affirms that the EU law is fully compliant with international law. This is their final ruling. The EU Aviation Directive, the world’s only mandatory program to address emissions from aviation, will take effect in January 2012. The Court’s decision makes clear that existing law bars precisely the discriminatory treatment of airlines that the United States and others are calling for.   Click here to view full story…