China Instructs Airlines Not to Comply With EU Emissions Trading Program

By Stephen Gardner and Avery Fellow (Washington, D.C.)  

BRUSSELS—Chinese airlines should not comply with European Union regulations requiring them to participate in the bloc's Emissions Trading System for greenhouse gases, the Civil Aviation Administration of China said in a directive issued Feb. 6.

China's airlines should not pay a charge on carbon emissions allowances imposed by the Europe Union or add other fees without government permission, according to an English-language account of the directive posted on a government website.

The move could deepen international disputes about the inclusion of non-EU airlines in the ETS, which came into force Jan. 1, and covers all flights into, out of, and within EU territory.

The United States, India, Russia, and other countries also have resisted inclusion of their operators in the trading system.

U.S. Transportation Department spokesman Bill Mosley said in an e-mailed statement Feb. 6 that the department had no comment on China telling its airlines not to participate in the ETS.

EU Stands Fast

Isaac Valero-Ladron, climate spokesman for the European Commission, the EU's executive arm that administers the ETS, said the Commission had not been contacted directly by the Chinese authorities regarding the instruction to airlines, and that it was unclear “whether this is an order [or] a recommendation.”

Chinese airlines had complied so far with the ETS, including registering for the program and applying for carbon permits, most of which are issued to airlines for free, leaving a percentage to be purchased on the carbon market, he said.

“Implementation is there, and compliance is happening. Of course, political discussions will go on,” Valero-Ladron said.

He added that the European Union will continue to implement the legislation to incorporate non-EU airlines into the ETS. This includes a provision for fining noncompliant airlines €100 ($131) for every metric ton of carbon dioxide they emit for which they do not have a carbon allowance. Airlines that persistently breach the rules could be banned from the European Union.

Valero-Ladron said the European Union is open to discussions with other countries, or within the International Civil Aviation Authority (ICAO), about putting in place alternative measures to the inclusion of airlines in the ETS.

“If ICAO in six months or a year passes a measure that produces effective emissions reductions, our legislation clearly says that it can be amended, and we are very happy to amend this legislation,” Valero-Ladron said.

Legal Issues Raised

The apparent instruction to Chinese airlines follows comments made in January by Cai Haibo, deputy secretary-general of the China Air Transport Association, who said the European Union should not take unilateral action on aviation emissions, but should allow the sector to put global measures in place. (See related story; 3 WCCR, 1/5/12.)

According to the Feb. 6 statement from China, the European Union's inclusion of non-EU airlines in the ETS contravenes the terms of the U.N. Framework Convention on Climate Change and “the relevant principles” of ICAO.

However, in a December 2011 ruling, the EU Court of Justice dismissed similar arguments made by Airlines for America (A4A), formerly the Air Transport Association of America, and a number of U.S. commercial airlines. The court ruled that inclusion of non-EU operators in the ETS did not break international agreements. (See related story; 248 WCCR, 12/21/11.)

“There is no question that the United States and the rest of the world are united against the EU's unilateral and counterproductive scheme,” A4A spokesman Steve Lott said in response to China's action.

He said U.S. airlines are still complying under protest.

Valero-Ladron said China had previously indicated it might file a case before the EU Court of Justice, but this had not happened.

The European Union is “confident that our legislation breaches no principle of international law,” he said. “We'll see other countries in court if there is any country that wants to file a lawsuit.”

Room for Negotiation?

Peter Liese, the German member of the European Parliament who oversaw the passage of the 2008 EU Directive (2008/101/EC) that included airlines in the ETS, said the Chinese statement should be treated with caution.

“It seems to give room for negotiation” because it is not clear that the Chinese authorities would ultimately instruct their airlines not to comply with the ETS, he said.

He added that the costs airlines would incur because of ETS participation are low.

“If we give in because of a €1.90 ($2.50) additional cost for a flight to Shanghai, this will have major implications for the credibility of the EU in other policy areas,” he said. “Europe needs to negotiate with China and of course with the U.S.”

Bill Hemmings, an aviation specialist with the advocacy group Transport & Environment, said China should set out what it will do to cut emissions, rather than seek to undermine EU legislation.

“The Chinese government expects its airlines to be carrying half a billion passengers a year by 2015, so we are not talking about a minor player; they need to be taking climate change seriously,” he said.

U.S. Also Opposes Inclusion

U.S. Secretary of State Hillary Clinton and Transportation Secretary Ray LaHood asked the European Union in December to suspend or delay its plans to include U.S. airlines in the ETS, citing objections similar to China's, but the bloc told U.S. officials Jan. 16 it would not change its stance.

Transportation Department spokesman Mosley said Feb. 6 that DOT is reviewing the EU response.

“We urge the EU to halt or, at a minimum, suspend application of the Directive and to reengage with the rest of the world to find a way forward at ICAO to address this important issue,” he said in an e-mailed statement.

“The U.S. has a number of options at its disposal that we will exercise as appropriate,” Mosley said.

DOT has asked airlines to report information about their participation in the ETS. Mosley said the department will use the information to determine the economic impact of the ETS on airlines. Annie Petsonk, international counsel for the Environmental Defense Fund, said the information request was similar to the type requested in preparation for a legal battle. (See related story; 5 WCCR, 1/9/12.)

The United States also could bring a complaint under ICAO, the United Nations' civil aviation body, or decide to charge European airlines to maintain flight path access to the United States.

Bill Could Force U.S. to Act

The Senate on Feb. 6 passed a Federal Aviation Administration reauthorization bill (H.R. 658) containing a provision calling for the U.S. government to use all “political, diplomatic, and legal tools” to ensure the ETS is not applied to U.S. airlines. The vote was 75-20 in favor.

The House approved the conference report by a 248-169 vote Feb. 3.

For More Information

An English language account of the Chinese notice regarding participation in the EU Emissions Trading System is available at