Tensions grow over EU aviation emissions

BY AGENCIES

GLOBAL planemaker Airbus joined a chorus of concern that a European scheme to charge airlines for carbon emissions risks triggering a full-blown trade war, with implications for plane deals and even Europe's crippling sovereign debt crisis.

The EU's Emissions Trading Scheme (ETS), introduced on January 1, has drawn howls of protest from airlines around the world, with China banning its carriers from taking part.

The escalating row comes just ahead of a summit between Chinese and EU leaders in Beijing on Tuesday, with the EU looking to China to dip into its huge foreign exchange reserves to help the euro zone tackle a debt build-up that threatens its economic stability.

Airbus Chief Executive Tom Enders said he was increasingly concerned at the potential fall-out if tensions are not defused.

"I am very worried about the consequences of that. What started out as a solution for the environment has become a source of potential trade conflict and that should be a worry for all of us," he told an aviation conference ahead of the Singapore Airshow on Monday.

China is seen as a vital strategic market for the world's two big planemakers, as it coordinates purchases centrally and regularly places orders with Airbus and Boeing in batches of 100 or more to coincide with high-level political contacts.

Chinese domestic air traffic quadrupled between 2000 and 2010, and is expected to keep growing at more than 7 percent a year up to 2030, according to Airbus research, and Boeing predicts China will be the second-biggest market for new aircraft behind the United States between 2011 and 2030.

China last year delayed the final signing of a deal for 10 A380 superjumbos worth $4 billion for Hong Kong Airlines in a signal of its displeasure over the EU plans, and in the mid-1990s, it refused to buy French products such as wheat and Airbus planes in retaliation for France selling fighters and frigates to Taiwan.

Last week, Beijing banned its airlines from joining the ETS without its permission, and threatened to take unspecified measures to defend itself against the scheme, which levies charges for carbon emissions on flights in and out of Europe.