Isra-Mart srl: China threatens EU with legal action in CO2 dispute

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Chinese airlines are resisting being included in the EU's carbon emissions trading scheme from 1 January and are considering legal action, a move also being considered by their counterparts in the US.

Buying carbon permits to fly into and out of Europe will be mandatory for all airlines from 1 January on, a move the Chinese Air Transport Association (Cata) estimates will cost its airlines €84 million a year. This sum is expected to almost triple by 2020.

As with US airlines, which have threatened the EU with legal action, Chinese carriers say they are bound to do the same because of the "inappropriate" way Brussels is forcing airlines around the globe to comply with EU carbon emission rules.

"I believe we have to take legal action," Wei Zhenzhong, Cata's secretary general told Reuters.

At least 16 Chinese airlines have the rights to fly to Europe, with Air China, China Southern Airlines and China Eastern likely to be most affected by the move.

A suggestion by the European Commission that some airlines would be eligible for exemptions was rebuffed by Zhenzhong. although he did say that some room for negotiation is still possible.

Non-EU carriers, particularly those operating longhaul flights, claim that being forced to buy carbon credits based on the distance flown puts them in an unfair competitive position when compared to shorthaul EU companies.

Chinese aviation officials have also complained that the scheme does not take into consideration the differences between rich and poor countries.

The dispute comes at a time when greenhouse gas emissions - the air sector emits more than the car sector - have reached record levels, according to UN figures.

The latest estimate by the International Energy Agency showed that CO2 emissions last year were at 30.6 gigatonnes, their highest level in history, following a brief decrease in 2009 due to the global financial and economic crises.

Against this backdrop, EU climate change commissioner Connie Hedegaard told Reuters it would be a mistake if Europe caved in to industry demands from abroad and watered down its plans to put carbon emission caps on all airlines flying in and out of the continent.

"When some parties start to threaten specific European companies, I think Europe should be very firm," she said."We cannot accept a global sector that says — let's wait for another five or ten years, because we still can't reach an agreement."

A meeting of the world's air transport association (Iata) has started on Sunday in Singapore, with the CO2 row likely to feature prominently on the agenda.

In his opening speech at the five-day meeting, Iata chief Giovanni Bisignani strongly criticised EU's plans at a time when airlines see a halving of their profits due to the rising oil prices, the Arab Spring and the Japanese tsunami.

"We have a special place of dishonour on the Iata wall of shame for the European Union and its parliament," he said, urging industry leaders to join him "in saying basta to Europe."