France urges EU to solve airlines carbon payment row

PARIS Thu Apr 5, 2012 3:35pm BST

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PARIS (Reuters) - France has urged the European Commission to resolve a row over plans to make airlines using EU airports pay for their carbon emissions - a move that has angered the United States, India and China and stirred threats of a trade war.

The EU must "make all the necessary efforts" to find a solution acceptable to countries outside the region, French Prime Minister Francois Fillon said in a letter to European Commission President Jose Manuel Barroso late last month.

In a reply sent last week, Barroso said the European executive was seeking a global deal, which the Commission has repeatedly said would be the one outcome that would justify modifying the EU's own law.

"We continue to work very closely with all our international partners in pursuit of an international solution through the ICAO (International Civil Aviation Organization)," Barroso said.

Under EU legislation, which began to take effect on January 1, all airlines flying to and from EU airports will be required to offset their carbon emissions, using the bloc's complex Emissions Trading Scheme (ETS) to help tackle climate change.

China has been at the forefront of opposition to the EU's law and has suspended aircraft orders from Europe's Airbus EAD.PA worth $14 billion (8 billion pounds).

Fillon, who faces a looming French election and anxiety about unemployment, said Airbus, airline Air France (AIRF.PA) and engine maker Safran (SAF.PA) had warned 2,000 jobs were at risk.

"This situation is causing strong concerns among companies," Fillon said in the letter dated March 22, seen by Reuters.

"It seems absolutely vital that the EU ... deploy every effort necessary to find mutually acceptable solutions with the third-party countries," he added.

DECADE OF INACTION

The European Commission said it was driven to making all airlines pay for their emissions after more than a decade of talks at the United Nations' ICAO had failed to find a solution to rising emissions of greenhouse gases from aviation.

It has also said it is working hard to bring about an international deal and, at Brussels ministerial meetings, all 27 EU countries have stated their support for the EU law.

Since international tensions have flared, efforts at the ICAO have gained momentum, although many environmental groups still question whether it can deliver a viable plan.

It has some breathing space in that none of the airlines faces a bill until next year, after this year's emissions have been calculated.

In addition, the bulk of the necessary carbon allowances will initially be handed out for free.

Opponents of the scheme say the issue is largely about the principle of what they regard as an extra-territorial tax rather than about the relatively small sums the airlines will have to pay, which in many cases they have already passed on to passengers.

The Commission makes clear the Emissions Trading Scheme is not a tax and Europe's highest court has agreed. It also found the EU's legislation was compatible with international law.

On March 28, a group of U.S. airlines dropped a private lawsuit challenging the carbon law, calling on the U.S. government to take over the issue.

(Additional reporting by Barbara Lewis in Brussels; Writing by James Regan and Barbara Lewis)

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