Friday, June 15, 2012

Airplane Carbon Emissions May Cause Trade War

Story first appeared in Bloomberg Businessweek.

The global aviation industry group warned Tuesday that governments might be moving toward a trade war over Europe's carbon charges on airlines and appealed for a negotiated settlement.

China, India, Russia and 26 other governments that oppose the charges issued a joint declaration in February that cited possible retaliatory steps such as imposing charges on European airlines.

The last thing that anyone wants as an industry is a trade war. The problem is that the way things stand right now, there is a distinct possibillity of something like that happening.

The European Trading System requires airlines that fly to and from Europe to buy permits for all the carbon they emit en route. The charges took effect Jan. 1 but airlines will not be required to pay until next year.

China and India have prohibited their airlines from cooperating and Beijing has blocked purchases of European aircraft by its carriers in protest. European courts have rejected legal challenges by U.S. airlines, supported by governments including China and India.

Talks on a global system to regulate airline emissions have begun in the International Civil Aviation Organization, a U.N. body. The European Union has said it would be willing to reconsider its system if an agreement is reached.

Aviation accounts for 3 percent of total carbon emissions but is the fastest-growing source.

EU officials have defended the charges as in line with Europe's efforts to be a leader in curbing climate change. Environmentalists welcomed the program, one of the most far-reaching measures adopted by any government to regulate greenhouse gas emissions.

Other governments object that Europe should not be imposing charges on what airlines do outside Europe.

The conflict adds to uncertainty for an aviation industry that is being squeezed by high fuel prices and a weak global economy.

The industry can't afford to be caught in the middle of a trade war over the EU's extraterritorial application of its emissions trading system.

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