Airlines around the world led by the International Air Transport Association (IATA) on Sunday urged for a UN-brokered deal to prevent a row over aviation emissions between China and the European Union escalating into a trade war. The dispute also puts efforts to come up with an international solution to Europe’s financial crisis in jeopardy and highlights the difficulties faced by airlines in an uncertain climate. Singapore’s Transport Ministry and Civil Aviation Authority, along with Singapore Airlines (SIA), also voiced opposition to the carbon tax, but SIA said it would comply with the regulations.
IATA urges UN mediation
IATA Director General Tony Tyler said airlines had become wedged between conflicting domestic laws after China ordered its airlines not to join the EU’s mandatory emissions trading scheme for regulating aviation emissions. This is seen as a hardening of China’s stance ahead of a 14 February summit in which the EU will seek Chinese assistance for its sovereign debt crisis.
Mr Tyler called the Chinese action a “very bold move”. “This is an intolerable situation which clearly has to be resolved; it cannot go on like this. I very much hope of course that we are not seeing the beginning of a trade war on this issue and eventually wiser counsels will prevail,” the Director General said.
This call comes as signs are emerging that the EU may be willing to soften a unilateral position that also risks damaging efforts to obtain Chinese support to resolve Europe’s financial crisis.
The European scheme to charge airlines for emissions on flights into or out of Europe, which took effect on January 1, is intended by the EU to fight global climate change. China was among the first to oppose the EU’s cap-and-trade scheme, which has also triggered protests from the United States and India.
Dim outlook for airline industry
The dispute comes at as the airline industry faces a tough year, with high oil prices and Europe’s debt crisis. The IATA has forecasted profit of $3.5 billion for the global airline industry in 2012, but added this could turn into a loss of $8.3 billion should a deep recession take hold in Europe.
The IATA has urged the EU to drop its airlines emissions cap in favour of a global programme still being worked out by the UN’s International Civil Aviation Organisation (ICAO). The current dispute has not yet affected flights as carriers are not required to hand over permits until next year.
Markus Ederer, EU’s ambassador to China, said based on current carbon prices and free permits, the EU’s system would increase a flight ticket from Beijing to Brussels by about 17.50 yuan (or US$2.80), but airlines can be exempted from the EU’s emissions trading scheme if their home government enacts a similar programme.
Mr Tyler also said that more airline bankruptcies are possible after the failure of Spanair SA and Malev Zrt, commenting that this would be “a disaster”. However, he added that Asian carriers will likely be in a stronger position than those in Europe due to economic growth in countries such as China, and a slump in cargo demand may also be bottoming out.
Report: Airlines urge U.N. deal to avert carbon trade war (Reuters, 12 Feb 2012)
Report: China Airlines in ‘Intolerable’ Spot on Europe Levies, IATA Says (Bloomberg, 12 Feb 2012)
Singapore objects to carbon scheme on airlines
Last week, Singapore’s Transport Ministry and Civil Aviation Authority said the city-state objects to the EU’s emissions trading scheme and has voiced its views on the issue to the European Commission and EU member countries. It said, “Our preference is for the application of any market-based measure to be within a global framework under the auspices of the ICAO.”
Singapore Airlines also disagrees with the EU’s unilateral move to charge foreign airlines on their emissions, but said it would comply with the regulations.
It said the new ruling could “'cripple competitiveness as it offers carriers operating through hubs closer to Europe an unfair advantage”, since the emissions tax is based on total flight distance.
Report: Call for UN to mediate China-EU aviation row (Straits Times, 13 Feb 2012)