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India Says 27 Nations to Consider Retaliation on EU Airline Levy

Feb. 10 (Bloomberg) -- India, China and the U.S. will be among at least 27 nations that will consider retaliatory steps following the European Union’s extension of its carbon market to aviation, according to an Indian aviation ministry official.

New taxes and charges on European airlines, as well as the re-opening of bilateral treaties governing flight rights will be considered at the two-day meeting in Moscow, due to start Feb. 21, the official told reporters in New Delhi today. He declined to be identified citing government policy.

India will also protest the EU’s decision when Prime Minister Manmohan Singh and EU President Herman Van Rompuy hold summit level talks in New Delhi today, the official said. The Moscow meeting follows a statement adopted in November by the United Nations’ International Civil Aviation Organization calling on the EU to exempt overseas airlines from the carbon system, which was designed to curb pollution starting Jan. 1.

The EU decided in 2008 that aviation should become part of its cap-and-trade carbon program after airline discharges in Europe doubled over two decades. Emissions from international aviation now account for 2 percent to 3 percent of global greenhouse gas discharges, according to the EU.

Airlines must monitor and report their emissions on all flights into and out of Europe each year, and purchase carbon permits to cover these discharges. Airlines will be given about 85 percent of their permits free of charge in 2012. One permit is equivalent to one metric ton of carbon dioxide.

ICAO Plan

According to the European emissions trading directive, the bloc may consider changing its carbon law to fit in a global plan for airlines by the UN International Civil Aviation Organization. Flights to, from and within Europe were included in the EU emissions trading system at the beginning of this year.

“While the EU ETS legislation is an important step, I can be absolutely clear that the EU wants greater reductions to be agreed through ICAO,” Jos Delbeke, director general for climate at the European Commission, said Feb. 7, according to a speech published on the EU website. “We are willing to review our legislation, in the light of agreement on market-based measures being agreed in ICAO.”

China has already banned local carriers from supplying emissions data to the EU, while U.S. airlines unsuccessfully tried to prevent the extension of the market mechanism in a legal challenge last year. Non-European governments have said the system impinges sovereignty as the EU monitors and charges emissions outside of Europe, such as those generated on the final leg of a flight from Asia.

Compensation

Only three Indian carriers, state-owned Air India Ltd., Jet Airways (India) Ltd., the nation’s biggest, and Kingfisher Airlines Ltd. operate services to Europe.

The EU should compensate airlines if some rivals fail to comply with rules of the carbon market, Jonathon Counsell, head of environment at British Airways, said yesterday at a London conference. BA is a unit of International Consolidated Airlines Group SA.

“We want exemption for carbon costs on that route where there is non compliance,” he said at London’s Heathrow airport. The bloc could set aside some revenue from auctions of carbon allowances to pay compensation on those routes, he said.

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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