Threat of retaliation over EU emissions trading

Governments opposed to the European Union’s emissions trading scheme (ETS) for airlines are considering retaliatory measures including taxing European carriers and suspending talks on applications for new routes.

Representatives of more than 20 countries, including the US, China, Russia and India, are expected at a meeting in Moscow on Tuesday to consider 11 proposals aimed at pressuring Brussels to drop the scheme.

The meeting will also consider whether to widen the dispute to other sectors of trade.

A group of 26 countries signed a declaration opposing the scheme last November, and in January, China ordered its carriers to ignore EU regulations on emissions trading. In the US, the equivalent of the CAA, the Federal Aviation Administration (FAA), is involved in the campaign to halt the scheme and will be represented at Tuesday’s meeting.

However, EU climate commissioner Connie Hedegaard insisted there will be no retreat on the scheme. She said: “Threats won’t solve this problem.”

Opponents of the scheme say the International Civil Aviation Organisation (ICAO) should be left to develop a global scheme for emissions trading. Brussels says it acted precisely because ICAO failed to come up with an alternative scheme in the preceding decade and a half.

There is huge disparity in claims of the potential costs of emissions trading. Airline association Iata has said the ETS could cost carriers in excess of $2 billion a year.

However, aviation analyst Trevor Sikorski of Barclays Capital estimates the cost to the industry at 300 million ($390 million or £250 million) a year – with non-EU airlines paying 75 million ($98million or £62 million). China’s government claimed its carriers alone would pay almost $100 million.

Carriers also dispute the impact on fares. Ryanair has criticised the scheme, but imposed a charge of just 0.25 per passenger to cover the cost.

All airlines flying to and from the EU were required to join the ETS from January 1, although no charges will apply until March next year. The scheme requires companies to buy and trade credits for the carbon they emit.

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