China, India Mount Opposition Against EU Aviation Carbon Curbs

The European Union faced increased pressure to scale down its plan to impose carbon curbs on airlines after China’s carriers said they won’t comply with the rules and India signaled it may attempt to scupper the EU plan.

Europe should either scrap or delay its initiative to include flights to and from the region’s airports in its emissions trading system as of this year, according to the China Air Transport Association, or CATA. India may ask airlines to withhold emissions data, a civil aviation ministry official said, a move that would undermine the first expansion of the EU carbon cap-and-trade program beyond its borders.

“What we need to do now is co-operate together and pressure them to scrap this,” Chai Haibo, vice secretary general of Beijing-based CATA, said in a phone interview. Members of the association include Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp.

The warnings by China and India follow a declaration adopted in November by the United Nations’ International Civil Aviation Organization calling on the EU to exempt international aircraft operators from its curbs on carbon. The non-binding ICAO statement was supported by 26 countries, including the U.S., Russia and Japan, who said that the expansion of the EU program was inconsistent with international law.

The EU, which wants to lead the global fight against climate change, decided that aviation should become a part of its carbon program after airline discharges in Europe doubled over two decades and international organizations failed to enact emission curbs.

European Limits

Started in 2005, the European emissions trading system, known also as the EU ETS, imposes pollution quotas on more than 11,000 utilities and manufacturers. Emitters that produce less carbon dioxide than their quota can sell surplus allowances, and those exceeding their limits must buy additional permits or pay a fine of 100 euros per ton of CO2.

The European Commission, the 27-nation bloc’s regulatory arm, has repeatedly said that while its preferred choice is a worldwide solution to cut greenhouse gases from aviation, it won’t give up the expansion of the ETS to cover airlines. The EU law offers a possibility of exempting incoming flights from a particular country if that nation implements equivalent measures to cut pollution from its air transport sector.

EU law envisages penalties in case an operator doesn’t comply with the rules and foresees the possibility of imposing an operating ban on an airline if it persistently fails to meet its legal obligations, said Isaac Valero-Ladron, climate spokesman for the commission.

“We hope, however, that this very last resort will never need to be applied,” he said today by e-mail.

‘Actions Are Unilateral’

“Europe’s actions are unilateral,” Chai said. “Measures to tackle emission control should be decided as an industry globally, and not just by one party alone. It’s not right for one party to insist on charges.”

The Indian government hasn’t yet decided whether to proceed with the plan because of concerns about the possible impact on transportation, said the civil aviation ministry official, who declined to be identified because the discussions are private. Carriers aren’t required to provide environmental information under the bilateral pacts with EU members that govern India- Europe flight rights, he said.

P.K. Mohanty, a spokesman at the civil aviation ministry, declined to comment. Only three Indian carriers, state-owned Air India Ltd., Jet Airways (India) Ltd. (JETIN), the nation’s biggest, and Kingfisher Airlines Ltd. (KAIR) operate services to Europe.

The EU Court of Justice on Dec. 21 ruled that international airlines must comply with the EU carbon limits in a lawsuit filed by United Continental Holdings Inc. (UAL), AMR Corp. (AMR)’s American Airlines and the Air Transport Association of America.

U.S. Prohibition

The ruling followed a bill passed by the U.S. House of Representatives in November prohibiting the country’s airlines from participating in the ETS after the industry estimated that participation in the system would cost U.S. airlines $3.1 billion from 2012 to 2020. The measure needs backing from the Senate and President Barack Obama to become law.

Last month, the U.S. Department of Transportation asked U.S. carriers to provide information on the impact of the ETS.

International carriers will be given emission permits making up 85 percent of the industry cap in 2012 and will have to buy the remaining 15 percent at auction. EU permits for delivery in December rose 1.1 percent to 6.67 euros as of 11:56 a.m. on the ICE Futures Europe exchange in London, down 55 percent from a year ago.

To contact Bloomberg News staff for this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editors responsible for this story: Neil Denslow at ndenslow@bloomberg.net; Stephen Voss at sev@bloomberg.net

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