China gets tough over EU ETS inclusion: its airlines to take legal action and threatens other countermeasures
Mon 23 May 2011 – A Chinese government official has told GreenAir Online that Chinese airlines due join the EU Emissions Trading Scheme (EU ETS) are preparing to make a legal challenge against their inclusion, which will be backed by the China Air Transport Association (CATA). The official said other “countermeasures” are being considered by the government itself, including not buying Airbus aircraft, as a means of putting pressure on the EU. He said recent talks in Brussels with European Commission officials, during which exemption had been requested, had not resulted in a satisfactory outcome. According to a Reuters report, the issue is being taken seriously in European diplomatic circles and major European states with vested interests in Airbus are seeking a compromise. Meanwhile, a similar legal challenge by US airlines is due to be heard on July 5 in the European Court of Justice, although a ruling is not expected before the start of the EU ETS next January.
The Aviation EU ETS Directive allows for the airlines of a country outside the EU to be exempted if their government adopts ‘equivalent’ measures to tackle carbon emission reductions from aviation. However, the definition of equivalence remains unclear, even within the European Commission, with transport officials prepared to take a more relaxed view than their climate change counterparts.
Earlier this month, the General Administration of Civil Aviation of China (CAAC) issued guidance to its airlines that they should reduce the carbon intensity of their international and domestic operations by 22% by the end of 2020 compared to 2005 (see article). It was stressed that the timing was coincidental.
The Chinese official said ‘equivalence’ had been discussed during their Brussels meeting, “but the two sides had different expectations so there was no clear conclusion.”
With the start of the EU ETS a little more than six months ahead, China are unlikely to secure a decision on a legal challenge in time. The case brought by the US airlines and the Air Transport Association (ATA) was started back in December 2009 (see article). In order to instigate a legal action, the Chinese airlines would have to follow the US example and, as the EU cannot be sued directly, the case would initially have to be heard by a court in an EU member state. The three US airlines involved – American, United and Continental (the latter two have since merged) – are all being administered under the ETS by the United Kingdom, so the decision was clearcut. At the initial court hearing in London, both the airlines and the UK government agreed that the case be heard at the European Court of Justice (ECJ), as it involved EU law.
The four major Chinese airlines – Air China, China Southern, China Eastern and Hainan – that have been named so far are, however, administered by four separate EU states: Germany, the Netherlands, France and Belgium respectively, according to the latest list of operators covered by the EU ETS published by the Commission last month. CATA and the airlines concerned would therefore have to identify in which of the four states it wished the case to be heard, before it could reach the ECJ.
According to Nancy Young, VP Environment at the ATA, the US case has been scheduled to begin at the ECJ on July 5. “Our hope has always been to get a ruling by 1 January 2012 or not later than first quarter 2012, as the further we get into the 2012 trading obligation, the more harm is done to our members,” she told GreenAir. “Having the hearing in early July increases the likelihood of a decision within our preferred timeframe.”
The US case argues that the unilateral inclusion of airlines from outside Europe into the EU ETS infringes key articles in the Chicago Convention, the treaty that has regulated international civil aviation since 1944 and led to the formation of the International Civil Aviation Organisation (ICAO), the UN specialised agency. The Chinese airlines will no doubt also argue that under another UN treaty, the Kyoto Protocol, they are exempted from international legally-binding obligations to reduce carbon emissions as China is classified as a developing nation and should be excluded from Europe’s scheme.
The Chinese official said CATA and the airlines would seek support from the International Air Transport Association (IATA) for their case. IATA is already assisting the US airlines in their action and its CEO, Giovanni Bisignani, has been a vehement critic of the European carbon emissions cap-and-trade scheme, arguing that it is illegal and part of a patchwork of national and regional measures that will do damage to the industry. IATA and the wider aviation sector have called for a global sectoral approach to reducing aviation emissions under ICAO.
Last week, EU finance ministers agreed that a global carbon market for aviation and shipping would have the effect of both reducing international CO2 emissions from the two sectors and raise finance for the UN’s Green Climate Fund that has been agreed at the UNFCCC and requested ICAO to carry out work on implementing such a system (see article). The fund is looking to raise $100 billion a year by 2020 to help developing countries with climate change mitigation and adaptation.
The EU call was welcomed by the aviation industry as a vindication of its global sectoral argument. However, the Chinese official said there was “no way” that China would agree to such a move, whether under UNFCCC or ICAO.
IATA could therefore be placed in the difficult position of supporting the Chinese legal case against the EU but opposing China on the way forward in tackling aviation emissions.