Airline carbon tax talks with EU stall

Brussels advised to widen its approach to achieve consensus

Beijing remains firm on its stance of settling the carbon tax dispute with the European Union through a multilateral approach, a Chinese official said.

The official, who requested anonymity, said talks between China and the EU over the tax are making little progress.

The EU sent a delegation to Beijing for discussions on the Emissions Trading Scheme, often called the carbon tax, during the third round of the EU-China Strategic Dialogue in Beijing on July 10.

But sources close to the talks said no breakthrough had been made.

"The EU has an increasing sense of urgency as the window of opportunity narrows," the Chinese official told China Daily.

Under the tax, the EU began charging airlines that use EU airports for carbon emissions on Jan 1. The first payment is due on April 30, 2013.

Over 30 countries, including China, India, Russia and the United States, oppose the tax and have expressed a desire for any resolution to be part of a global emissions framework under the International Civil Aviation Organization.

China's basic stance is in accordance with this approach, the official said.

"We don't think a bilateral channel is an acceptable way to solve the issue," the official added.

The EU needs to sit down and convince everybody that they have something attractive that should be adopted by others, a UN official said. "It's good for them that they can raise standards, but they cannot impose it," said Amina Mohamed, deputy executive director of the United Nations Environment Program.

At a conference before the strategic dialogue, Markus Ederer, EU ambassador to China, said there is high-level contact between Brussels and Beijing.

The EU has offered a system of equivalent measures, Ederer said. This means that if a country takes measures to reduce aviation emissions, the EU will exempt them from the carbon tax. But the exact amounts of emission reduction and tax exemption have yet to be defined.

Yang Fuqiang, a senior advisor on energy, environment and climate change at the Natural Resources Defense Council, said there are a few options that might be regarded as equivalent measures.

The measures could include cutting greenhouse gas emissions from the aviation sector by adopting energy-saving technology and using more advanced carriers or cleaner fuel.

Discussing emissions is a positive development in the fight against climate change, Yang said.

However, "common but different responsibilities" are not recognized by the EU, he said. Generally, developing countries lag behind in aircraft manufacturing and related technology, so periods of immunity should be granted to those countries based on the different stages of development, Yang said.

"Possibilities could be explored in discussions, but the EU should put forward a fairer proposal," Yang added.

The Civil Aviation Administration of China said in February that airlines should not pay the EU charge. Eight Chinese, and two Indian airlines, have yet to submit emission data to the EU.

Companies that do not comply face fines and ultimately could be banned from using EU airports.

"The scheme is widely opposed by many countries,'' the official said.

According to industry estimates, paying the EU carbon tax will cost China's aviation industry 790 million yuan ($124 million) this year and an estimated 3.7 billion yuan in 2020.

China has its own carbon trading plan but it's not the right time to include the aviation sector in it, said officials and researchers.

China plans to start seven pilot carbon emissions trading projects next year in five cities — Beijing, Shanghai, Tianjin, Shenzhen and Chongqing — and two provinces, Guangdong and Hubei. A national plan is likely to be introduced after 2015.

"China and the EU are not so far apart,'' Ederer said.

"We are working with China, with our expertise to help China figure out the best way for its emissions trading system. So I think we are going the same direction."

Some experts expressed concern that the EU will be deeply involved in setting standards in China's carbon market, according to Qian Guoqiang, strategy director of Sino-Carbon Innovation & Investment Co.

But other experts say any national domestic carbon tax is still some way off.

"Emission trading is the future direction, but the timing is still not right," said Pan Jiahua, executive director of the Research Center for Urban Development and Environment with the Chinese Academy of Social Sciences.

It will be a challenge to have a nationwide scheme by 2015, Pan said.