India has threatened to ban European airlines from its airspace if Indian carriers face sanctions for refusing to comply with the EU’s emission trading scheme regulation.

“Travelling is always a two-way traffic,” said Ajit Singh, civil aviation minister.

“If they can impose sanctions so can other countries.”

Last week, the European Commission issued figures showing more than 1,200 airlines had complied with its emission trading scheme.

But two Indian – Air India and Jet Airways – and eight Chinese airlines had refused to submit their 20111 carbon emission data.

EU Climate Commissioner Connie Hedegaard warned these ten airlines could face sanctions unless they comply by mid-June.

Beijing has already threatened a trade war over the carbon regulation issue, and has barred China’s airlines from participating in the scheme.

In March, European aircraft manufacturer Airbus said Beijing was blocking orders by China’s state-owned carriers for 35 new A330s jets with a total list price of $12 billion in a challenge to the carbon charges.

From January 1, all airlines that fly in and out of the EU were brought into the region’s cap-and-trade carbon market.

Under the scheme, airlines have been given a limit of how much carbon pollution they can emit annually.  If they emit more than their limit, they have to buy extra carbon permits to cover their excess or face penalties. To soften the impact, airlines were given free carbon permits that amounted to 85% of their carbon pollution in 2005.

However, may countries have objected that the EU’s actions infringes on their sovereignty.

In December last year, the EU’s highest court, the EU Court of Justice, ruled the ETS law was valid and did not breach international treaties. It also agreed with the Commission that the ETS was a market-based mechanism, not a tax.

The EU first introduced the aviation legislation in 2008, but it was not until last year that countries began to object vehemently.

The legislation will allow a foreign airline to opt out of the scheme if their country introduces its own equivalent carbon cutting scheme.

Most parties are looking to the United Nations’ International Civil Aviation Administration(ICAO) to come up with a global approach to curbing emissions from airlines, although nothing has been tabled yet.

EU carbon prices are currently very depressed because the 2008 recession created a glut of permits in the market that failed to clear before another downturn this year.

The 2012 EU carbon allowance slipped below 7 euros ($8.75)a tonne Thursday compared to around $983.25 for a tonne of delivered jet into Le Havre in France.

As of 24 May, OPIS’s ETS “clean spread”, published in the OPIS Jet Fuel and Gasoil Report, stood at $27.36. It represents the amount an airline would pay per tonne of jet fuel burned to cover their extra carbon emissions. That adds 2.85% to the jet fuel bill.

Willie Walsh, chief executive of IAG, Europe’s third largest airline, said the ETS cost the group 15 million euros in the first three months of the year.

Posted in News