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China bars airlines from EU tax plan

By Simon Rabinovitch, FT.com
updated 2:08 AM EST, Mon February 6, 2012
China is challenging new charges for carbon emissions across EU airspace, opening up fears of a possible trade war with China.
China is challenging new charges for carbon emissions across EU airspace, opening up fears of a possible trade war with China.
STORY HIGHLIGHTS
  • The Chinese government has barred the country's airlines from complying with a European Union charge
  • Chinese airlines had previously said they would not pay the EU carbon tax

(CNN) -- The Chinese government has barred the country's airlines from complying with a European Union charge on carbon emissions, escalating a dispute that officials have warned could turn into a trade war.

Chinese airlines had previously said they would not pay the EU carbon tax, but the formal prohibition by the State Council, or cabinet, puts Beijing in direct opposition to Brussels.

The announcement, published on Monday by Xinhua, the official news agency, comes a week before Chinese and European leaders are to meet at a summit and just days after Wen Jiabao, China's premier, said Beijing was looking to provide more financial support to help Europe out of its debt mess.

The Civil Aviation Administration of China has notified all Chinese airlines that, without government approval, they cannot join the EU emissions trading scheme or charge customers extra because of it, Xinhua said.

The impact on Chinese airlines with routes to Europe was unclear. Although the EU's carbon scheme went into effect for airlines on January 1, Brussels has not started charging them yet. But all airlines using EU airports have been brought into the scheme. Those that do not comply face fines while persistent offenders could be banned from EU airports.

"China hopes that Europe will directly address our concerns, in light of the overall situation of global climate change, the sustainable development of international aviation and Chinese-European relations," the Chinese aviation authority said.

It also said the EU should adopt a "practical and constructive attitude" to come up with a solution that would be acceptable to both sides.

It added what appeared to be a veiled threat: "China will consider additional measures to protect the interests of our citizens and our companies".

The China Air Transport Association, an industry group, said last year that Beijing might sue the EU over its carbon plan. But the prospect of a legal battle dimmed after the European Court of Justice ruled against a challenge brought by US airlines, saying the carbon trading scheme did not infringe on the sovereignty of other nations.

Although the aviation industry only accounts for about 3 per cent of global carbon emissions, its share is growing quickly and the EU believes its carbon trading scheme is an important part of the fight against climate change.

Chinese state media have called it a "trade barrier in the name of environmental protection" and the foreign ministry has upbraided the EU for its "unilateral" imposition of the carbon scheme.

When German Chancellor Angela Merkel visited Beijing last week, Premier Wen said China might contribute more to rescue funds that are aimed at resolving the European debt crisis.

Premier Wen is scheduled to meet José Manuel Barroso, European Commission president, and other European leaders at a bilateral business summit next week in Beijing.

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