China Bans Airlines from Participating in EU’s Emissions Program

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China has banned its airlines from taking part in a European Union carbon-emissions system designed to curb pollution, saying the program violates international rules, contravening both the United Nations Framework Convention on Climate Change and international civil aviation regulations.

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Carriers are also barred from using the EU program as a reason for raising fares, the Civil Aviation Administration of China said in a statement posted on its website today.

The EU hopes to resolve the issues in negotiations, but they may ultimately be ruled on by the courts, Markus Ederer, the EU’s ambassador to China, said at a press briefing today in Beijing.

India, Russia, the United States, and global airlines have also objected to the system that would impose a levy on those exceeding emissions limits, saying it will be less effective than a global solution.

The China Air Transport Association has called on the government to oppose the EU levy and is working on a legal challenge in Germany. Whether the lawsuit moves forward will depend on the EU reaction to the China ban, said Chai Haibo, vice president of the group, whose members include China’s big three state-controlled carriers, Air China Ltd., China Southern Airlines Co., and China Eastern Airlines Corp.

On January 1, the EU expanded its carbon-trading system to include aviation in a move that could cost Chinese airlines as much as 800 million yuan, or roughly $127 million, in 2012 alone. Based on current carbon prices, the system would boost the cost of a Beijing-to-Brussels ticket by 17.50 yuan, Ederer said.

“I leave it to you to make a judgment on whether this is too much for saving the Earth,” he said, adding that there is still time for discussions, as airlines have until April 2013 to submit permits for carbon emissions this year.

Governments introducing similar programs will exempt their carriers from the EU system, Ederer said. The International Civil Aviation Organization, a UN body, has said that it plans to form a global system.

Countries that oppose the EU emission trading program have called it illegal, saying it impinges their sovereignty because carriers are charged for pollution that happens outside of Europe.

India has asked carriers not to give emissions data to the EU, and plans to work with other nations to oppose the program.

The U.S. House of Representatives passed a bill last year prohibiting the country’s airlines from participating in the EU carbon program after the industry estimated that participating would cost airlines $3.1 billion from 2012 to 2020. However, the bill must still receive approval from the Senate and the president before it becomes a law.

Shinichiro Ito, president of All Nippon Airways Co., Asia’s largest listed carrier by sale, said that he favors a global system over a regional one. The carrier and the Japanese government are also working on ways to oppose the system.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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