China Green Carbon Foundation

China Air Transport Association (Cata) dismissed the inclusion of Chinese companies in the European carbon scheme from 1 January 2012 as illegal.

"If the EU insists on imposing its ETS on our carriers, we would urge the Chinese government to take corresponding measures to protect Chinese airlines' interest in the global air transport industry," Cata said in a statement to the EC on 11 March, published on its website on Monday.

It did not specify what type of measures it had in mind.

All flights to and from the EU will be included in the ETS from next year, regardless of the flight operators’ nationality.

Airliners will be given an initial cap of 97 per cent of their average emissions over 2004-2006, and analysts predict the global industry will be forced to buy 70-90 million permits next year to meet their targets.

Cata, representing China’s largest airlines including Air China and China Southern Airlines, said the EU move violates the Chicago Convention as well as the UN principle of common but differentiated responsibilities.

The Cata statement calls for negotiations between governments and airline companies in all impacted countries before the ETS expansion to include aviation goes ahead.

“We have submitted the required emissions data (to the EU) and that’s all we can do now. Whether we will participate in the EU ETS or not will depend on the government-level talks,” said one airline official who wished to remain anonymous.

However, no such negotiations between China and the EU are scheduled.

Market

Aviation firms that fail to meet their ETS targets will need to buy EU allowances to compensate, but can also use a limited amount of cheaper certified emissions reductions (CERs), issued by the UN.

However, Chinese domestic regulations do not allow Chinese firms to buy CERs, because of its status as a developing country under the Kyoto protocol.

It is unclear whether Chinese airlines would be allowed to gain access to CERs through their EU-based legal subsidiaries.

“Fuel efficiency improvement is the best option (to reduce emissions) given current available technologies and the financial situation,” an official from the Civil Aviation Administration of China (CAAC) said.

“Alternative solutions such as market mechanisms should be carefully assessed and discussed by all relevant parties,” he added.

Allan Zhang, director of sustainability and climate change at PricewaterhouseCoopers China told Point Carbon News it would be unrealistic to ask the Chinese airline companies to pay millions of euros to purchase EUAs.

Instead, a middle way has to be found, he said:

“A likely compromise is that Chinese firms can use cheaper domestic credits, such as forestry credits or voluntary emission reductions (VERs) to comply. I don’t think they will like the idea to buy EUAs to cover all their emissions,” said Zhang.