Alarm grows as EU refuses to budge on carbon tax

BEIJING // The world is slipping into a global trade war because the European Union refuses to back down over a decision to impose a unilateral carbon tax on airliner emissions, the airline industry says.

China, which is currently leading the opposition to the new European emissions charging regime, yesterday threatened immediate retaliation if any of its carriers were issued with fines or bans for snubbing a mid-June deadline for airlines to comply.

"The Chinese government will impose similar penalties on European airlines swiftly after any EU action," warned Wei Zhenzhong, the secretary general of the China Air Transport Association.

Mr Wei was speaking before the opening of the International Air Transport Association (Iata) annual general meeting (AGM) in Beijing, where the EU's continuing insistence on imposing its emissions trading scheme (ETS) was being treated with mounting alarm.

Tony Tyler, the director general and chief executive of Iata, the global airline industry's trade body, said Europe's stance threatened a trade war.

He said Iata member airlines were already on target to manage the 2 per cent of global man-made carbon emissions attributed to aviation. The plan was to achieve carbon-neutral growth by 2020 and to halve its 2005 net emission levels by 2050.

"To meet our ambitious targets, however, we will need governments to introduce globally-coordinated, positive market-based measures," Mr Tyler told the opening session of the Iata AGM.

"Sustainability should unite the world, not divide it with affronts to sovereignty that risk a trade war, a war that nobody wants and from which no winner can emerge," he added. "Certainly no airline - European or otherwise - should be a target for retaliation because European governments are acting extra-territorially. Everyone - including Europe - agrees that the only real solution is a global agreement."

Such an agreement, however, is impossible under current conditions, Mr Tyler argued. "Europe seems more committed to implementing its ETS unilaterally than to sincerely negotiating a multilateral agreement. For Europe's international counterparts it's like being asked to negotiate with a gun to their head," he said.

The EU insists it was forced to act unilaterally because airline carbon-dioxide discharges in Europe had doubled over the past two decades and the United Nations body overseeing the industry, the International Civil Aviation Organisation,had repeatedly failed to introduce a global emissions control scheme.

The ETS, which was drawn up in 2008 and has already started operating, requires airlines using EU airspace to pay a charge on how much carbon they emit, not just in EU airspace, but en route to and from it. It is the EU's insistence on charging for carbon emitted beyond its borders that has sparked international outrage.

Middle East carriers say they will comply under protest, but China and India have pledged more direct action.