China confronts EU on aviation tax

"The Civil Aviation Administration of China (Caac) recently issued a directive to Chinese airlines that without the approval of relevant government departments, all transport airlines in China are prohibited from participating in the EU ETS," the aviation body's said in a statement.

It also banned Chinese airlines from increasing fares because of the tax.

Caac added that the EU scheme "runs contrary to relevant principles of the United Nations Framework Convention on Climate Change and international civil aviation regulations" - despite the fact the European Court of Justice last December said ETS complies with international rules.

China's decision is the latest in a series of defiant moves by countries with large aviation sectors, including India, Russia and the US.

The US congress last October also adopted a bill prohibiting American airlines from taking part in ETS. The draft law is not yet in force. According to a report in the Press Trust of India, the US, China, India, Russia and around 30 other countries will hold talks in Moscow on 21 February on potential retaliation measures.

The EU says the carbon tax will help it to achieve its goal of cutting emissions by 20 percent by 2020 - direct CO2 emissions from aviation account for about 3 percent of the EU’s total greenhouse gas.

A person flying from London to New York and back generates nearly the same level of emissions as an average person in the EU does by heating their home for a year says the commission.

Meanwhile, the International Civil Aviation Organisation, which sets the rules for air travel, estimates that emissions from the sector will increase by up to 88 percent between 2005 and 2020 and by up to 700 percent by 2050.

Under the ETS blueprint, 85 percent of aviation allowances will be free-of-charge for 2012. The remainder will be paid by the airlines - an added cost of €256 million.

For its part, the aviation industry says the scheme will damage business. Airlines also argue they already pay a number of taxes imposed by national governments to help reduce pollution.

China says its aviation sector would have to pay an additional €97 million per year for all flights into and out of Europe. It estimates that the cost could increase by four-fold by 2020.

The commission has recommended that costs can be passed onto passengers by charging them an additional €4-to-€24 on two-way long haul flights. The US' Delta Airlines has already added a €4.5 surcharge on flights to Europe, according to Agence France Presse.