Carbon trade war heats up

Honk Kong Airlines – a subsidiary of Chinese carrier Hainan Airlines – said it was under pressure from the government in Beijing to cancel the order worth an estimated $3.8 billion (2.85 billion euros), the South China Morning newspaper reported.

"We cannot do something which is against our country's interest," Hong Kong Airlines president Yang Jianhong is quoted by the newspaper as saying.

The threat is seen coming in the wake of the European Union's Emissions Trading Scheme (ETS), which was imposed from January 1 and will charge global airlines for their planes' carbon emissions on the whole distance of Europe-bound flights and not just in European airspace.

China has banned its airlines from complying with the EU scheme.

A spokesman for Airbus in Singapore told AFP news agency that there was "no change to the status of the order" at the moment.

Global muscle-flexing

ETS is intended to help the European Union achieve its ambitious goal of cutting CO² emissions by 20 percent by 2020. The 27-nation bloc has vowed not to back down in the face of fierce international resistance to ETS.

China argued that its airlines would be facing additional costs to the tune of 800 million yuan ($125 million) a year, and that the amount would soar four times by 2020.

The country is one of 26 other countries, including Russia, India and the United States, which are opposed to the scheme and which agreed on a catalog of retaliatory measures at a meeting in Moscow last week.

Tom Enders, chief executive of Airbus, already said earlier last month that he was worried about the prospect of a "trade war" emerging from the dispute.

"What started out as a solution for the environment has become a source of potential trade conflict," Enders said.

uh/gb (AFP, Reuters)