Top China airlines to ignore EU carbon tax, body says

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China's biggest airlines will not pay a new European Union tax aimed at cutting carbon emissions, their trade body has said.

On 1 January, the EU brought airlines under its Emissions Trading Scheme (ETS), which levies a charge on flights based on their carbon emissions.

Chai Haibo of the China Air Transport Association said that its members would not co-operate with the ETS.

However, the EU said it would not back down on the issue.

Dispute

The China Air Transport Association (CATA) represents companies including Air China, China Southern Airlines, China Eastern Airlines and Hainan Airlines.

Airlines which do not comply with the new EU tax can be fined and even prohibited from flying into the region.

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The dispute is hard to understand on one level because the sums of money involved are so trifling”

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Last year, it was claimed the plan could cost Chinese airlines 95m euros ($124m, £79m) in extra annual costs.

"The CATA, on behalf of Chinese airlines, is strongly against the EU's improper practice of unilaterally forcing international airlines into its ETS," Mr Chai said on Thursday.

However, Isaac Valero-Ladron, EU spokesman for climate action, said: "We're not modifying our law and we're not backing down.

"We're confident that companies will comply. The penalties for non-compliance are much higher (than complying)."

The EU estimates the costs of air fares will rise by between 2 and 12 euros per passenger to pay for the tax.

The scheme is being implemented on a gradual basis, with 85% of carbon allowances handed out to airlines for free this year.

Bills for 2012 flights not covered by the allowances would be calculated and imposed in 2013.

Retaliation

Kelvin Lau, a Hong Kong-based airlines analyst at Daiwa Securities, said: "Maybe it's just a political gesture for Chinese airlines to say they won't pay - showing that China strongly opposes the rule.

"But it may not work as this is a law with legislative power and the EU would not easily let go."

Speaking to the BBC, Tony Tyler, director general of the International Air Transport Association (IATA), said: "The money being raised through this measure, along with all the money being raised by other taxes that are imposed on the industry in the name of the environment, none of it gets spent on anything that's going to reduce emissions."

China has warned that it may implement retaliatory measures against the levy.

The tax has been criticised by China, India, the US and Canada.

In December, the US lost its attempt to have the issue of the new airline tax blocked by the European Court of Justice.

The US had argued that its carriers were set to lose out heavily, and that the charges violate climate change and aviation pacts.

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