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Global Trade War Threat As India Rejects EU Carbon Tax

The threat of a global trade war over a European Union scheme to control airlines’ carbon emissions has been ratcheted up by India refusing to comply with the plan. The country’s aviation minister confirmed Indian airlines have been instructed not to supply the EU with details of how much pollution their aircraft emit, backing China’s stance that saw its carriers cancel £8.8bn of orders with European aeroplane manufacturer Airbus.

Under the Emissions Trading Scheme (ETS), from January 1 this year flights operating in and out of Europe have to buy carbon permits to offset their emissions, although they will not be billed until the end year and will at first be handed 85pc of allowances for free. A March 31 deadline has been set to supply data to help impose the charges.

Ajit Singh, India’s aviation minister, said: “Though the EU has directed Indian carriers to submit emissions details of their aircraft by March 31, no Indian carrier is submitting them in view of the position of the government. Hence the imposition of a carbon tax does not arise.”

The move builds on the comments earlier this week from an Indian official who said: “The question is, are you [the European Union] provoking the world into a trade war?”

Non-European nations have reacted angrily to the ETS because it covers entire flights and not just parts in European airspace. Last month countries opposed to the ETS – including the US, India, China and Russia – met in Moscow to discuss possible retaliatory steps. As well as cancelling orders from aerospace companies, possible measures could include a formal complaint with the United Nations’ International Civil Aviation Organization (ICAO), halting talks with European airlines on new routes, retaliatory levies on EU airlines and even fees for overflying countries.

Europe could hit back at India by blocking a Free Trade Agreement with the country.

EU Climate Commissioner Connie Hedegaard said Europe adopted the ETS because of the United Nations’ failure to agree a global scheme to control rising aviation emissions. She has repeatedly said the EU will stand by its law unless the ICAO produces a worldwide plan.

The European Parliament has also reiterated support for the carbon charge and officials say it could decide to express its anger at India by blocking the Free Trade Agreement with the country.

The Daily Telegraph, 24 March 2012