Brussels downplays Chinese government threat to EU carbon market
China’s decision today to bar its airlines from complying with the EU’s Emission Trading Scheme (ETS) may have been more bluster than bludgeon because the carriers have already signed the paperwork.
Tensions are running high between Beijing and Brussels, and commentators are claiming Europe’s unilateral carbon market regulation could spiral into a trade war.
China first threatened to boycott the EU carbon market in early January. Today the Chinese Civil Aviation Administration notified all the country’s airlines that without government approval, they cannot join the EU emission trading scheme or use the scheme as a reason to raise fares or fees.But the inclusion of aviation into the ETS happened on 1 January this year, and airlines that wanted to receive free carbon allowances have already submitted the paperwork to join the scheme, the European Commission pointed out today.
This included submitting details of flights in and out of Europe during 2010.
“Fact, all Chinese airlines to date have complied with regulation, and have applied for free allowances,” said European Commission spokesperson, Isaac Valero Ladron.
Failure to comply with the ETS results in penalty fines, but these will not be imposed until after 31 March 2013, the deadline day for meeting the 2012 carbon cap.
The Chinese announcement today is the latest in a string of criticisms, legal actions, and threats made to the European Union for its decision to regulate the carbon emissions of airlines that fly in and out of its territory.
Countries around the world have responded angrily to a scheme they see as a violation of their sovereignty.
An airline that takes off in New York or Beijing will have to pay a penalty to EU governments for their carbon emissions over the entire journey if they land at an EU airport.
US airlines attempted to avoid the scheme through the courts, but lost the case in the European High Court of Justice.
The US Congress is now expected to pass a bill preventing US airlines from joining the scheme in coming weeks.
China has claimed that the EU carbon market could cost Chinese airlines 95 million euros ($124m) in extra annual costs.
Under the terms of the scheme, an airline is set a cap, or limit, on the volume of carbon dioxide it can emit in a year. If the airline exceeds this cap, it has to buy EU carbon allowances or credits from the market.
The impact of the scheme was cushioned by giving airlines a certain amount of EU allowances, each worth a tonne of carbon dioxide, for free every year.
In 2012, the aviation sector will receive around 176 million EU allowances for free, and from 2013 to 2020, they will receive around 170 million of these permits for free a year.
However, the free allocation will not cover the industry’s carbon dioxide emissions within the EU scope because the aviation sector has grown sharply since 2004 and 2006.
The sector will be short around 60 million tonne of carbon dioxide allowances in 2012, according to analysts.
If carbon prices were to remain around 9 euros a tonne this year, the industry would face a bill of 540 million euros. Governments will auction carbon allowances throughout the year and the money will go into the coffers of EU member state governments, with no guarantees of them re-investing into green technologies.The EU has left the door open for foreign airlines to escape the clutches of the ETS, with the condition being that their national government impose similar carbon reduction policies or schemes.
And with the Europe teetering on the brink of recession, and with several countries unable to throw off a crippling debt burden, international political pressure may soon tether the green winged aspirations of the EU parliament, the body which passed the legislation that brought both foreign and domestic aviation into the ETS.
Many member states in the EU are not as environmentally conscious as Brussels.