By Ed King
China’s refusal to pay the EU’s new airline emissions levy has come as no surprise.
They have been vociferous opponents of the carbon tax, which will take effect in 2013, together with the USA, India, Canada and Russia.
China has banned domestic airlines from joining the EU Emissions Trading Scheme
These states appear to regard the EU’s carbon-emissions trading system as an infringement on their sovereignty, as it taxes emissions outside the EU, and some claim it breaks international law.
The prospect of a trade war breaking out is now all too real – with the impoverished EU, emboldened by a European Court of Justice ruling in 2011, determined to stick to its principles and enforce the charge.
For some a comprehensive EU-ETS is the (unofficial) first step towards fulfilling clause 2 of the Durban Platform, which aims to enforce a ‘legal instrument or outcome’ applicable to all parties.
If the EU’s efforts to make the aviation industry pay for its emissions failed at the first hurdle, where would this leave the hopes for a binding global agreement by 2015?
Limited leverage
Estimates suggest that aviation counts for 3% of global carbon emissions. In addition, airlines are not taxed on their fuel.
And despite economically losing ground to the far-east, Europe is still a vital hub for international carriers, dealing with around 40-50% of global traffic.
As in Durban the EU has cast itself as a guardian of progressive thinking, leading the low-carbon charge.
But while laudable, and in the long-term necessary, this bold unilateral move could do the EU and future climate negotiations more harm than good.
If the EU backs down, then the concept of global emissions trading will be placed on the back-burner, rather than the after-burners.
In a week’s time Chinese and European leaders are meeting to discuss the provision of more financial support for the EU bailout fund.
And as the FT reported this morning, the Chinese Aviation Authority, an extension of the government – has said it “will consider additional measures to protect the interests of our citizens and our companies”.
Despite the strong words of EU climate commissioner Connie Hedegaard, it is easy to see how China’s financial leverage could see it crack European unity on this policy in a way the other states opposing this levy could not achieve.
Politics versus environment
The Chinese – conveniently or otherwise – appear to see this measure as a trade barrier rather than an environmental levy. Their trade body estimates it could cost them $127m in 2012.
“This is more of a political fight than about protecting the airlines,” Konrad Hanschmidt, a carbon-markets analyst at Bloomberg New Energy Finance told his sister company Bloomberg News earlier today.
“The carbon costs would have a relatively small impact on airfares, as they account for approximately 1 percent of fuel costs.”
So if it’s not the cost, then what is the issue?
As all those in that stormy final session in Durban found out, China and India deeply resent the developed world bossing them about.
They perceived efforts to enforce ‘a legal instrument’ as obscene, given their current rate of development and levels of poverty, and decried the lack of ‘equity’ in proceedings.
Before heading to the Durban climate talks I spoke to Professor Stephen Chan, an expert at the School of Oriental and African Studies in all matters Chinese, and asked him how we could account for China’s attitude at global talks.
“I don’t think the Chinese ARE facing down the developed world. I think they ARE a large part of the developed world,” he emailed back.
“On climate issues, they simultaneously pollute hugely AND have put into play the greatest range of green measures. The latter hardly cancels out the former, but the Chinese would say the West is not trying as hard as they.”
That may be the crux of the argument.
Some in China regard the airline levy as the EU’s way of squeezing more cash out of its burgeoning economy, and of all the countries complaining about these charges, it arguably has the most leverage.
The argument will rumble on. It also heralds the start – albeit indirectly – of talks to establish a replacement to Kyoto.
And if the EU loses this argument, then what hope has it got of leading the way on a global treaty?