Airlines told not to pay EU green tax

Domestic airlines have been banned from complying with the European Union's scheme to impose charges on carbon emissions from flights to and from Europe, the civil aviation authority said on Monday.

The charges are opposed by more than two dozen countries, including the United States, Russia and India.

The Civil Aviation Administration of China issued a directive, authorized by the State Council, to notify all domestic airlines of the ban.

"Without the approval of relevant government departments all airlines in China are prohibited from participating in the EU's emissions trading scheme (ETS)," said a statement on the State Council website.

The statement also said that airlines were barred from using the ETS to increase fares or other passenger charges.

"China will consider adopting necessary measures to protect the interests of Chinese individuals and companies, pending developments," the statement said.

Under the ETS, airlines must buy additional allowances for their emissions beyond a set level or face fines.

The ETS, which took effect on Jan 1, could see around 4,000 airlines paying the EU for their carbon emissions.

Chai Haibo, deputy secretary-general of the China Air Transport Association, said the EU's decision has provoked wide opposition.

Earlier, the US industry group, the Air Transport Association of America, and the International Air Transport Association tried to challenge the move in EU courts, arguing that the ETS infringes on national sovereignty and violates international aviation treaties. But the EU Court of Justice dismissed the arguments in December.

Following the failure in court, the US Congress is expected to pass a bill in the coming weeks to formally oppose the EU law on aircraft emissions.

Chai said he believed the directive issued by China's civil aviation authority is similar to the bill to be passed by the US.

"Both are clear expressions of opposition to the EU law from the governments," he said, adding that domestic airlines now must abide by the directive.

The directive came as some foreign airlines announced new ticket fees since the ETS came into force.

US carrier Delta, one of the world's biggest airlines, added a $6 surcharge for return flights between the US and Europe.

Germany's Lufthansa indicated it would raise its fuel surcharge, following Belgian carrier Brussels Airlines, which increased it by 10 euros ($13) to 135 euros for international flights and by 3 euros to 39 euros for EU routes, AFP reported.

No Chinese airlines have cited the EU tax to increase fares. Chinese carriers, including China Southern Airlines, China Eastern Airlines and Hainan Airlines, have said they will follow the ban.

Luo Zhuping, secretary of the board of China Eastern Airlines, said the order is good news for passengers because airlines are forbidden to raise prices for the carbon tax.

Chinese airlines are estimated to need to pay 800 million yuan ($125 million) this year as required by the EU scheme. The payout could be almost four times higher by 2020 as Chinese flights to and from Europe increase.

"We hope that the EU understands the global negative response to its scheme and cancels or revises its plan," Chai said.

But the EU ambassador to China, Markus Ederer, said at a news conference on Monday that with free credits taken into account, the added cost per passenger on a flight from Beijing to Brussels would be only 17.5 yuan or 1.9 euros.

"I leave it to you to make a judgment on whether this is too much for saving the Earth, combating climate change and making headway together," he said.

As for calls to solve the issue under a multilateral framework, such as the UN International Civil Aviation Organization, Ederer said that Europe is in ongoing discussions with related organizations to seek an international resolution before collecting money.

"We are ready to engage in a discussion on recognizing the equivalent measures which would then exempt airlines of those countries from the necessary dues that would have to be paid," he said.

But if conflict over the charges finally happens, it may go to court, he said.

Zhang Min, an expert on European studies at the Chinese Academy of Social Sciences, said that if China and the EU fail to reach an agreement, China may adopt countermeasures against the EU.

Chai agreed. "China does not want this to end antagonistically. But if the EU sticks to its guns it is hard to predict what countermeasures the Chinese government will take."

Some analysts said that Chinese airlines may actually pay the carbon tax to avoid damaging their business in Europe. Li Lei, an aviation analyst with CITIC Securities, said that Chinese airlines are "in a dilemma".

"They have to meet the EU's demand unless they stop flights. As negotiations take time they might end up paying the tax during the negotiating period to keep their routes to and from Europe open," he said.

The Chinese government is trying its best in the interests of the carriers but the final solution may be a trade-off, he said.