China escalates trade war with EU by banning airlines from paying carbon taxes on flights

Conflict could spiral into global trade dispute

China today announced it has banned its airlines from paying European Union charges on carbon emissions, escalating a global dispute over the cost of combating climate change.

The charges are aimed at curbing emissions of climate-changing gases but governments including China, the U.S. and Russia oppose them.

The ratings agency Fitch warned in December that the conflict could spiral into a global trade dispute.

Ban: China has forbidden its airlines from paying EU charges on carbon emissions, escalating a global dispute over the cost of combating climate change

The Chinese air regulator said the country's carriers are barred from paying the charges or other fees without government permission, the official Xinhua News Agency reported.

A statement by the Civil Aviation Administration of China said: 'China objects to the EU's decision to impose the scheme on non-EU airlines.'

It said Beijing will now consider unspecified measures in response to protect Chinese companies.

There was no indication there would be any immediate impact on flights between China and Europe or penalties for Chinese airlines.

The charges took effect in January but money will not be collected until next year.



The dispute highlights Beijing's complicated status in global climate efforts.



China is the biggest source of climate-changing gases but as a developing country is exempt from Kyoto Protocol emission limits.

Owners of Chinese power plants and factories have received billions of dollars from a European system that pays developing countries to curb emissions but Beijing has resisted binding limits.



Under the European system, airlines flying to or from Europe must obtain certificates for carbon dioxide emissions. They will get free credits to cover most flights this year but must buy or trade for credits to cover the rest.

Anger: A United Airlines flight takes off from Frankfurt Airport - one of Europe's busiest. Under the scheme, airlines will be given free credits this year, but in future will have to buy or trade them to cover the levy

Markus Ederer, the EU ambassador to Beijing, defended the charges as consistent with Europe's efforts to be a 'green leader' in curbing climate change and said they treat European and foreign carriers equally.



Mr Ederer said it is too early to consider questions such as whether Chinese carriers might be compelled to pay.



He said EU regulations include a provision to exempt carriers from countries with 'equivalent measures' to curb carbon emissions.

He said: 'We are ready to engage in a discussion on recognising the equivalent measures which would then exempt those airlines of those countries from the necessary dues that would have to be paid.'

Mr Ederer said that with free credits taken into account, the added cost per passenger on a flight from Beijing to Brussels, would be 17.50 yuan or 1.90 euros (£1.57 / $2.70).



He said: 'I leave it to you to make a judgement on whether this is too much for saving the Earth, combating climate change and making headway together.'



Environmentalists welcomed the European initiative, one of the most far-reaching measures adopted by any government to regulate greenhouse gas emissions.



Although only 3 per cent of total human-caused carbon emissions come from aircraft, aviation is the fastest-growing source of carbon pollution.



U.S. airlines, supported by governments including China and India, filed a legal challenge to the charges but the EU's highest court upheld them in December.

Beijing could have unusually strong leverage in a possible dispute because its state-owned airlines carry large numbers of Chinese and other Asian tourists to Europe.



Any disruption would hurt Europe's travel industry when the continent is struggling with a debt crisis and high unemployment.

The International Air Transport Association has criticized the charges as 'market distorting'.

It says the EU should negotiate through the International Civil Aviation Organization to reach a global agreement.

IATA, which represents about 240 airlines that carry 84 per cent of global air traffic, estimates the new rules will cost airlines up to 900million euros (£745million / $1.2billion) this year and rise to 2.8billion euros (£2.3billion / $3.7billion) in 2020.