China has ordered its airlines to ignore a 2008 European Union law that imposes a “carbon emissions tax" on all flights traveling to and from the EU.
The carbon emissions tax will cost the airline industry an estimated €9 billion ($11.8 billion) by the end of 2020, Reuters reported back when the European Court of Justice (ECJ) ruled that the 2008 law was reasonable and "fair."
“Application of the emissions trading scheme to aviation infringes neither the principles of customary international law at issue, nor the open-skies agreement,” the ECJ said in its ruling.
It has also been estimated by The European Commission that costs per passenger will increase by €2 ($2.60) to €12 ($15.60) for airlines participating in the cap-and-trade program.
Unsurprisingly, international airlines are unhappy with the expensive new tax, as vocal opposition from both Canadian and U.S. airlines has made abundantly clear. However, going one step further than either the U.S. or Canada, China is the only country to outright disregard the EU’s expansion of its carbon cap-and-trade system.
See the Euronews update:
“China has ‘banned’ all airlines in the country from joining the European Union's Emissions Trading Scheme (ETS) aimed at cutting carbon emissions,” the BBC reports. “The authorities have also barred the airlines from increasing their fares or adding new charges for the scheme.”
"China objects to the EU's decision to impose the scheme on non-EU airlines," Xinhua quoted a statement by the Civil Aviation Administration of China as saying.
Analysts believe that China has chosen to disregard the EU's cap-and-trade law because the airline industry is volatile enough as it is.
"The sector is already facing quite severe challenges," Chris De Lavigne of Frost & Sullivan told the BBC. "The airline industry as a whole has already been hit by high fuel costs in the past couple of years and no one wants additional cost factors coming in."
Obviously, the decision by China to ignore the carbon emissions tax puts the EU in an odd position. Does the EU simply turn the other cheek or does it attempt to enforce its carbon tax?
"We are not backing down and this legislation will apply to companies operating in Europe," said Isaac Valero-Ladron, spokesman for EU climate action commissioner Connie Hedegaard.
He warned that the law carries fines for airlines that ignore it. But will that make any difference?
"It is going to be very tricky. You have to wait and see how the EU will react," Siva Govindasamy of Flightglobal told the BBC. "They would be able to stop the Chinese airlines from flying to the EU, but that could see retaliatory action by China which will not be good for either side," he added.
Analysts believe that because of the parties involved, the EU will be forced to seek assistance from an international authority.
"It could potentially end up on the desk of the World Trade Organization as the countries who are against it have said it is an unfair trade practice," said Frost & Sullivan's Mr Lavigne. "Both sides have claimed that this is either fair or unfair, so it is very difficult to see how this is going to shape up."