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China May Challenge EU Over Aviation Emissions by Year-End

Chinese airlines aim to take the European Union to court by the end of the year over its plan to enforce emissions curbs on flights to and from the region’s airports, an official with China’s air travel association said.

The EU plan, part of a larger carbon-capping program, will be challenged in a lawsuit to be filed in Germany by airlines and the China Air Transport Association, Chai Haibo, the Beijing-based vice president of the association, said today.

“We are in the preparation for the lawsuit and hope to file as early as possible, hopefully by the end of this year,” Chai said. Members of the association include Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp.

The 27-nation EU, which wants to lead the global battle against climate change, decided in 2008 to include flights to and from the region’s airports in its emission-trading system as of next year after airline discharges in Europe doubled over two decades. Airlines and governments outside the bloc oppose the plan, claiming it breaches international law.

The EU’s plan will see airlines getting 85 percent of the permits needed to met their emissions limits distributed free of charge in 2012, while the remaining 15 percent will be sold.

Ticket Prices

Chinese airline officials have said the plan would result in higher air fares that could damp European growth and deter Chinese tourists from visiting the region.

Airlines could even profit from their inclusion in the emissions trading system as negative economic impacts are likely to be minimal, Domagoj Baresic, a London-based analyst at Bloomberg New Energy Finance, said by e-mail.

“The effect on ticket prices will depend on the proportion of costs airlines decide to pass through to passengers,” he said today. “About 40 percent of the total cost of buying permits may be passed through to ticket prices to allow the airlines to earn a profit in the years through 2020,” he said.

The United Nations aviation body adopted last week a non-binding resolution at the urging of 26 nations, including China, the U.S. and Russia, calling for the exemption of non-EU airlines from the cap-and-trade program. Separately, carriers including American Airlines Inc. and United Continental Inc. are challenging the law in the European Court of Justice.

Ruling Next Year

The bloc’s rules to include aviation in its emissions trading system, or the ETS, are compatible with international law, according to an Oct. 6 non-binding opinion by an adviser to the EU court, signaling the suing airlines should lose the challenge. A ruling is expected at the beginning of next year.

Meanwhile, the U.S. House of Representatives passed a bill prohibiting the country’s airlines from participating in the ETS, arguing that the EU exceeds its jurisdiction. The industry estimated that participation in the cap-and-trade system would cost U.S. airlines $3.1 billion between 2012 and 2020. The measure needs backing from the Senate and President Barack Obama to become law.

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