(Corrects March 20 story from New Delhi to remove reference to
Garuda and quote from president director in paragraphs 32 and 33
because the accuracy of the quote could not be verified)
* No formal go-ahead yet for non-compliance, says official
* Indian official says Europe risks provoking a trade war
* Commission looks to ICAO to deliver global solution
* IATA boss says Europe must make concessions
By Anurag Kotoky
NEW DELHI, March 20 India will urge its airlines
to boycott the European Union's carbon charge scheme, raising
the prospect of a global trade war over a law requiring flights
in and out of Europe to pay for their greenhouse gas emissions.
A senior Indian government official told Reuters that India
would soon ask local airlines not to buy carbon credits from or
share emissions data with the bloc, which says other countries
are not doing enough to tackle this source of greenhouse gases.
China said in February its airlines were barred from
participating in the EU Emissions Trading Scheme (ETS) unless
they got government approval. Beijing has also suspended the
purchase of $14 billion worth of jets from European maker Airbus
India does not yet plan to ask airlines to cancel Airbus
purchases, but that is possible if the dispute escalates, said
the Indian official, who has direct knowledge of talks between
the EU and other countries on the issue.
If the European Commission then stopped Indian airlines from
flying to Europe, India would retaliate with similar moves and
consider charging an "unreasonable" amount for flying over
India, the official said on Monday.
"We have lots of measures to take if the EU does not go back
on its demands. We have the power of the economy; we are not
bleeding as they are," the government official said, adding that
Europe's position would harm its own economy and airlines.
The Indian government is awaiting formal approval from
several ministries to implement the order to airlines, which it
expects soon, the official said.
"The question is, 'Are you (the EU) provoking the world into
a trade war?'," the official said.
The European Commission's climate spokesman Isaac
Valero-Ladron said: "We will modify our legislation when there's
an ambitious global agreement in force."
The EU law obliging all airlines to buy carbon permits to
offset their emissions took effect from Jan. 1, but no-one will
receive a bill until April next year, after the amount of
emissions has been calculated.
That leaves plenty of time for sabre rattling.
China, Russia and the United States have already issued a
series of threats.
The United States said last year that it would take
"appropriate action" unless the EU reconsidered, though its
proposed blocking legislation stops short of making it illegal
to comply with the EU legislation.
The U.N.'s International Civil Aviation Organization (ICAO)
has accelerated efforts to find a solution, but is still not
expected to deliver anything before the end of this year.
It held talks in Canada last week and only agreed to keep
studying the options.
Outside the official ICAO forum, a so-called coalition of
the unwilling has held a series of meetings to debate ways of
opposing the ETS, but have not come to firm decisions on
The financial cost of the EU's scheme is small - around 2
euros per passenger for a flight from Beijing to Frankfurt, for
instance - and those who support it see it as a valuable
catalyst to action elsewhere.
"Aviation's entry into the ETS has prompted ICAO to set
itself a deadline to come forward with a global scheme by the
year's end," said Jos Dings, director at T&E, a non-government
campaign group focused on transport and the environment.
"Almost 15 years after the Kyoto protocol assigned
responsibility for dealing with aviation's climate impact to
ICAO, there is finally a sense of urgency."
The Intergovernmental Panel on Climate Change estimated that
aviation accounted for about 2 percent of greenhouse gas
emissions in 1999, and that had been rising about 9 percent a
year since 1960.
The European Commission has said it will modify its law if
the ICAO can deliver a convincing alternative and is working
towards a global agreement.
Tony Tyler, head of the International Air Travel
Association, said the last thing the industry wanted was a trade
war, but Europe needed to give some ground.
"They're going to have to show some willingness to make
concessions, otherwise it's not a negotiation ... What we've
seen in recent weeks is a hardening of attitudes around the
world on this issue," he said.
While aviation bosses have protested to the European
Commission, a group of Nobel prize-winning economists wrote to
U.S. President Barack Obama urging him to drop opposition to
charging airlines for carbon costs.
FREE TRADE AGREEMENT
India's opposition to the ETS could put paid to the chances
of the Free Trade Agreement (FTA) it is currently negotiating
with the EU. Differences over duties on cars and market access
for software and services companies were already standing in the
way of an accord.
"It would probably be extremely difficult, if not impossible
to get the FTA through the (European) parliament if India does
this (ignored EU ETS aviation law), and India is in the last
stage of this negotiation," said former European lawmaker Glyn
Ford, who now works at Brussels-based consultancy GPlus.
Amber Dubey, director for aviation at global consultancy
KPMG, said India was in the middle of a huge increase in its
fleets of both civilian and defence planes, with a significant
share of the orders coming from European suppliers.
"The EU-ETS issue is escalating fears of a trade war between
the EU and the rest of the world. There is a chance that the
government may decide to use these large aircraft orders as a
negotiating tool," Dubey said.
European planemaker Airbus has a 73 percent share of the
commercial plane market in India. It has orders for more than
250 planes with IndiGo, Go Air and Kingfisher Airlines
, making India a crucial growth market.
Foreign governments including the world's top three carbon
emitters, the United States, China and India, say the EU is
exceeding its legal jurisdiction by charging for an entire
flight, as opposed to just the part covering European airspace.
But Europe's highest court ruled in December that the EU law
did not breach international agreements.
Thai Airways President Piyasvasti Amranand said
the state-controlled airline also opposed the EU law, but
declined to comment on its impact on plane purchases.
"If nothing changes, this will cost us 200-300 million baht
($6.5-$9.75 million) a year starting 2013," Piyasvasti said.
"I do agree with the idea of reducing carbon emissions, but
the way EU has come up with the calculation for making airlines
pay is something we feel is unfair."
India this month inadvertently delayed approval of some
European summer schedules by a day, which disrupted the flight
schedules of many European airlines.
The official said India might use that example to show how
disruptive a dispute with the country could be.
"If things continue like this, then European airlines will
be forced to avoid flying over India and go over the Indian
Ocean and the Bay of Bengal," the official said. "That's not
viable for them. They won't have fuel to do that."
($1 = 30.7250 Thai baht)
(Additional reporting by Barbara Lewis in Brussels and Ploy Ten
Kate and Manunphattr Dhanananphorn in Bangkok; Editing by Will