CHINA SEEKS EXEMPTION FROM EU CARBON TRADE

May 10, 2011


China's aviation industry body has told the European Union it opposes the inclusion of Chinese airlines in the bloc's carbon emissions market from 2012, an EU source said on Tuesday.


"There were useful discussions with China's Air Transport Association on Friday, but they indicated they opposed being included in the EU Emissions Trading Scheme (ETS)," the source said, speaking on condition of anonymity.


"We had constructive and useful discussions, covering a wide range of issues of mutual interest. It was noted that Chinese carriers operate efficient aircraft and therefore are in a better competitive situation than companies with older fleets. We agreed to continue our dialogue," the source said.


About 4,000 aircraft operators will be included in the EU's ETS from January 1 next year. Most flights to and from EU airports will be covered, regardless of the operator's nationality.


Aviation is responsible for about 3 percent of the EU's greenhouse gas emissions, and its levels are growing at a faster rate than those of any other sector.


The airlines will join about 11,000 factories and power plants whose emissions are currently capped under the ETS, a system that forces polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap.


Three Chinese airlines -- Air China, China Eastern Airlines and China Southern Airlines -- are challenging the EU regulations.


US AIRLINES IN COURT


The US industry group Air Transport Association of America and three major US-based carriers -- American Airlines and United and Continental, which merged last year to form United Continental Holdings -- are also challenging the EU's efforts to regulate long-haul flights into Europe.


US carriers whose long-haul flights cross EU airspace have filed a case with the European Court of Justice over the inclusion of their flights in the EU ETS, disputing the EU's right to regulate their emissions.


Should the US airlines win their case, the European Commission is expected to appeal. While the Chinese aviation industry opposes the EU regulations, it has not been as active as the US airlines in taking action.


"The Chinese aviation body still has to persuade the Chinese authorities to carry this through, so it is not necessarily a given that it will happen," said Andreas Arvanitakis, associate director of Point Carbon, a gas and carbon markets information provider.


"They are quite late in doing that and are several years behind the US," he said.


Airlines' entry to the EU's carbon market next year will add EUR€1 billion - EUR€1.4 billion (USD$1.4 billion - USD$2 billion) to their costs in the first year and ultimately lead to higher air fares and carbon prices, analysts say.


If US and Chinese carriers gain exemptions from the scheme, EU carriers could be at a significant disadvantage in the competition over the same international routes.


(Reuters)