China bars airlines from supporting EU Carbon Scheme

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An Air China Boeing jumbo jet in the sky. The Chinese government is banning its airlines from participating in the EU carbon trading scheme.

China has banned its airlines from complying with the EU’s carbon-emission system which has been introduced to curb air pollution.In addition to that, Beijing has also barred air carriers from increasing the airfares and adding new schemes in the airline sector. The ban came just after China Air Transport Association said its members do not support EUs Emission Trading Scheme (ETS).

A statement published on the website of China’s State Council, or cabinet, also said airlines are under directives not to use the EU’s emissions trading scheme (ETS) to increase fares or other passenger charges.

“The Civil Aviation Administration of China recently issued a directive to Chinese airlines that without the approval of relevant government departments, all transport airlines in China are prohibited from participating in the EU ETS,” said the statement.

Markus Ederer, EU ambassador to China hoped the stand-off would be resolved through negotiations.

“There are a number of avenues to be pursued — bilateral, multilateral and possibly legal,” Markus Ederer told journalists in Beijing.The EU would like to have an international solution to this… That’s the way forward, hopefully through negotiations, (to) find an agreement between all stakeholders”.

The scheme was implemented on 1 January which levies some charges on flights in the EU airspace based on carbon emissions.The three state controlled carriers of Chine included as the members are, Air China Limited, China Southern Airlines and China Eastern Airlines Corp.Chai Haibo, Vice President of China Air Transport Association said in the press, I believe all sides will negotiate again and find a solution. I cant imagine that the worst case, such as EU grounding Chinese flights could happen.

CHALLENGES AHEAD

Along with China, other countries like the US and Canada have severely criticised the scheme. China insists the EU-backed plan would cost Chinese Airlines $124m annually.

The sector is already facing quite severe challenges. The airline industry as a whole has already been hit by high fuel costs in past couple of years and no one wants additional cost factors coming in,Chris De Lavigne of Frost & Sullivan told BBC.

The European Commission insists that airlines will be able to manage the costs, estimating the scheme could prompt carriers to add between 4 ($5.25) and 24 euros ($31.50) to the price of a two-way long-haul flight.

“We are not backing down and this legislation will apply to companies operating in Europe,” said Isaac Valero-Ladron, spokesman for EU climate action commissioner Connie Hedegaard.

“It will be much more costly for any airline not to comply with the legislation than doing so.”

TRICKY MOVE

According to analysts, the move taken by the Chinese government is tricky and is likely to complicate because the EU will decide the next step.

Its going to be very tricky. You have to wait and see how the EU will react. They would be able to stop Chinese airlines from flying to the EU, but that could see retaliatory action by China which will not be good for either side,Siva Govindswamy of Fightglobal said.

However, some analysts suggest the growing differences between China and the EU should be resolved by the international trade body.

It could potentially end up on the desk of the World Trade Organisation as the countries who are against it have said it is an unfair trade practice,Lavigne said.

Both sides have claimed that this is either fair or unfair, so it is very difficult to see how this is going to shape up, he added.

GLOBAL SOVEREIGNTY

The International Civil Aviation Organisation, a UN body, said other carriers can be exempted from the EU system if their governments set up a similar plan. Presently, EU has 27 members in the global aviation system.

However, China Southern Chairman Si Xianmin said Europes emission programme is not beneficial in the current economic environment and would not help Europes efforts to escape the sovereign debt crises.

Apart from China, the US, Russia, India and several other countries have opposed the emission trading programme (ETS) terming it as an illegal move that infringes on their sovereignty.

Sources: Bloomberg, BBC News

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