China bans its airlines from paying EU's carbon tax

China geared up for a showdown with European Union by barring its airlines to pay EU's carbon emissions tax. China's airlines are not allowed to pay a charge on carbon emissions imposed by the EU without government permission, the Civil Aviation Administration of China (CAAC) said.

The CAAC said it had been authorised by China's Cabinet to notify the ban to all domestic airlines. The EU's decision to charge flights into and out of EU airports for carbon emission "runs contrary to relevant principles of the United Nations Framework Conven-tion on Climate Change and the international civil aviation regulations."

The EU's Emissions Trading Scheme, which has taken effect on January 1, is one of the widest-reaching measures adopted by any country or regional bloc to regulate emissions of greenhouse gases blamed for climate change. It is estimated that around 4,000 airlines will pay the EU for their carbon emissions.

"China objects to the EU's decision to impose the scheme on non-EU airlines, and has expressed its concerns over the scheme through various channels," the statement said.

"China will consider adopting necessary measures to protect interests of Chinese individuals and companies, pending the development of the issue," it said.

China hopes the EU can find proper solutions to the issue with considerations of the overall bilateral relations, the two sides' combined efforts to combat climate change as well as the sustainable development of the international airline industry, state run Xinhua quoted the statement as saying.

Chinese airlines have also been banned from increasing fares or other passenger charges because of the EU scheme, the Civil Aviation Administration of China (CAAC) said in a statement.

Although the carbon tax charges are effective, the money will not be collected until April 30, 2013, and China has added its voice to a growing global protest ahead of the collection date.

"The statement is sending the most concrete signal of China's opposition," Chai Haibo, deputy secretary-general of the China Air Transport Association, which represents the country's airlines said.

"It is high time for the EU to rethink its carbon tax scheme and respond in a positive manner," Xinhua quoted him as saying.

The EU had said airlines that refuse to comply will be fined, or even banned from flying in the EU in extreme cases. "The ETS is neither rightful nor rational. I believe China's airlines will implement the government's decree," Chai said.

Already squeezed by high fuel prices, Chinese airlines say they will face tougher times due to the carbon tax. The China Air Transport Association estimated that the scheme will cost 800 million yuan ($126.98 million) for the Chinese airlines in 2012, three billion yuan in 2020, and cumulatively 17.6 billion yuan over the next nine years.

Passengers may have to pay 200 to 300 yuan more for their plane fares as airlines may pass on the potential costs.