BUSINESS
02/05/2012 10:42 EST | Updated 04/06/2012 05:12 EDT

EU Airline Carbon Tax: China Bans Its Airlines From Paying Controversial New Fee

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BEIJING, China - China has banned its airlines from paying charges on carbon emissions imposed by the European Union, state media reported Monday.

The charges that took effect last month are aimed at curbing emissions of climate-changing gases but airlines say they are an improper tax. Dozens of countries including the United States, China and Russia oppose them.

The official Xinhua news agency quoted the Civil Aviation Administration of China as saying the airlines are not allowed to pay the tax or add other fees without government permission.

The ratings agency Fitch warned in December that the conflict could spiral into a global trade dispute.

The same month a European court rejected a lawsuit brought by U.S. airlines and supported by governments including China and India.

Beijing could have unusually strong leverage in a possible dispute because its state-owned airlines carry large numbers of Chinese and other Asian tourists to Europe. Any disruption would hurt Europe's travel industry when the continent is struggling with a debt crisis and high unemployment.

Under the European system, airlines flying to or from Europe must obtain certificates for carbon dioxide emissions. They will get free credits to cover most flights this year but must buy or trade for credits to cover the rest.

"China objects to the EU's decision to impose the scheme on non-EU airlines, and has expressed its concerns over the scheme through various channels," Xinhua quoted an aviation administration statement as saying.

The statement said China would consider "adopting necessary measures to protect interests of Chinese individuals and companies" but did not say what those measures would be.

The International Air Transport Association has argued the EU should negotiate through the International Civil Aviation Organization to reach a global agreement on the issue.

IATA, which represents about 240 airlines comprising 84 per cent of global air traffic, estimates the new emissions rules will cost airlines up to euro900 million ($1.17 billion) this year and rise to euro2.8 billion in 2020.

Environmentalists welcomed the program, one of the most far-reaching measures adopted by any government to regulate greenhouse gas emissions. Although only 3 per cent of total human-caused carbon emissions come from aircraft, aviation is the fastest-growing source of carbon pollution.