The EU's decision to force airlines to pay for carbon they emit by including the industry in its emissions training scheme (ETS) is flying into heavy weather, with Chinese officials saying the country's airlines will refuse to pay the levies..

The trading scheme, which has been running since 2005 for industry, but from which airlines have been specially exempt, is being introduced from 2012 and will apply to all airlines flying within and into the European Union.

The commission thinks it is high time aviation was brought into its flagship climate change-fighting scheme. It claims it would reduce annual carbon emission from the aviation industry from 300 million tonnes to 200 million tonnes per year, instead of seeing them rise to 500 million tonnes. The idea is that airlines will be pushed to introduce more planes that use less fuel - or at least run on a mixture of kerosene and biofuels.

Airlines have not unexpectedly been grumbling. Many will pass on the costs to their passengers, They say they contribute a relatively small proportion of global CO2 emissions; however. the EU claims that the industry's emissions are rising faster than those of other sectors, and that the sector's contribution could rise from 3 to 5 % of the world's total CO2 output in the next decade.

Connie Hedegaard, the EU's environment commissioner, says the average levy will only amount to 8 euros per passenger; that's smaller amounts than the taxes airports raise to fund runway maintenance and governments levy on flying travellers to subsidise domestic social policies and whatever it is they do with airport taxes. Small change when the battle is on to save the planet

China, though, claims its airlines (or, ultimately, passengers on those airlines) will lose 18 billion yuan, or about 2bn dollars, over the next decade in fees to the EU's coffers. At the International Aviation Transport Authority (IATA) annual meeting in Singapore yesterday, the deputy secretary general of the Chinese air transport association claimed the costs would be "radically unreasonable" and that China would take "legal action at a later date" unless the EU backed down.

The Chinese insist they are not against cutting CO2 emissions per se - domestically, the country has a plan to cut emissions across the whole range of industry by 45% by 2020, per unit of GDP.
It's just they say the EU's free emissions quota was set based on airline carbon output in 2006 levels, when the Chinese air industry was much less developed than it is today. These free quotas, based on outdated and very low figures for passenger kilometres carried, are effectively penalising the explosion in growth of Chinese aviation since that baseline quota date, putting them at a competitive disadvantage to slower growing European airlines.

The Emissions trading scheme works like this. Carbon in excess of a set quota has to be paid for, by "buying" permissions traded on the European carbon market. Today that cost is relatively low - 15 euros per tonne of CO2 - but aviation officials have quoted experts predicting the price of CO2 easily rising to 150 or even 200 euros in the coming years. That could hit, the Chinese say, the 11 Chinese airlines flying into Europe hard.

The EU has complained about China's attitude. "Why should a student flying from Scotland to Germany pay the fee while a Chinese businessman flying from Beijing does not," says EU commissioner Hedegaard. She has, however, held out the possibility of a compromise. Countries which promised to cut carbon on other sectors might avoid the carbon cost on their airlines.

"If you have equivalent measures of your own, you can be exempted," she told Reuters. "We can see in the Chinese press that they're working on that. We're looking at that to see -- is that what we can call an equivalent measure?"

We'll see how this political battle pans out. Meanwhile, any plans for a global emissions trading scheme look as far away as ever..

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Pelle Neroth -- EU correspondent

Edited: 08 June 2011 at 09:39 AM by Pelle Neroth