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 on the eve of a China-EU summit in Beijing, with the EU looking to China to dip into its huge foreign exchange reserves to help the eurozone 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 on Monday ahead of the Singapore Airshow. China is a 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 in the last decade 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. Foreign governments argue Brussels is exceeding its legal jurisdiction by calculating the carbon cost over the whole flight, not just Europe. Non-EU airlines say the levy is discriminatory. Increasingly, governments and the EU's executive European Commission are looking to the U.N.'s International Civil Aviation Organisation (ICAO) to find a global scheme that curbs airline emissions.
Singapore Airlines CEO Goh Choon Phong said opposition to the scheme was based on the way it is applied. "I was quoting the example of us flying non-stop from Singapore all the way to Europe. We get charged the whole journey, when somebody who could fly passengers to an intermediate point, and from there go to Europe, ends up paying much less," he told the same aviation conference in Singapore. Andrew Herdman, director general of the Association of Asia Pacific Airlines, said any European policy that alienates the United States, China, Russia, India and three dozen other countries "is simply not going to work." "The risk for the airlines if this generates into a tit-for-tat trade war, is that airlines will be caught in a cross-fire from both sides," he said.
