EU-Chinese carbon market contacts intensifying

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Meetings between EU and Chinese officials aimed at helping Beijing to draft plans for its own carbon emissions market are “increasing in intensity,” the EU’s chief climate negotiator, Artur Runge-Metzger has told EURACTIV.

The EU and China are currently involved in a high-stakes game of brinkmanship over the inclusion of international airlines within the EU’s Emissions Trading Scheme (ETS), with Brussels saying that it would exempt Beijing, if it implements an equivalent scheme of its own.

An EU special advisor travelled to China last month for talks, EURACTIV has learned, and these ended with a sense of frustration in Brussels at Beijing's apparently fragmented and uncoordinated climate policy-making process. 

However, two privately-held Chinese companies – the Beijing Energy and Environmental Exchange (CBEEX) and Shenzhen Carbonneutral Bio-gas – have reportedly begun work on blueprints for a Chinese carbon trading scheme.

CBEEX has previously been commissioned by China’s federal government to devise rules for a pilot CO2 market to be launched in Beijing next year.

Asked by EURACTIV whether the researchers on the two schemes had been in contact with EU officials, Runge-Metzger replied:  “We have had many contacts with Chinese officials from Beijing and also from the regions in order to look at emissions trading.”

These talks had focussed on how to set up a market-based scheme to regulate carbon dioxide emissions, the types of legislation needed, technical development of monitoring, reporting and verification methods, the setting up of compliance systems and carbon registries.     

Over the last 18 months, negotiations had been “very intense” Runge-Metzger expanded, with “missions coming through Brussels, oft-times officials.”

“I would say that they are increasing in intensity,” he added.

Retaliatory approaches

China has banned its airlines from participating in the scheme and published a draft Climate Change Law, which reportedly warns of “retaliatory approaches” if emissions are forcibly levied against its airlines.

In response, on 15 May, the EU gave Chinese and Indian airlines – two of which are also non-compliant with the ETS – one month to report their emissions or face the prospect of punitive action.

The deadline coincides with the date of an expected proposal of a draft resolution to the dispute by a working group of the International Civil Aviation Organisation (ICAO). The market-based mechanism will then go forward to an ICAO Council meeting  in November.

In March, a senior Chinese trade official told EURACTIV that his country did not want a trade war with Europe and favoured a resolution of the dispute at the ICAO.

But senior figures in the long-haul airline industry profess alarm that the spat could spiral out of control.

Underlying the issue is a long-running feud between the developed world and emerging economies over who should pay for the costs of mitigating climate change, and what exactly their “common but differentiated responsibilities” should be.

“There is still a lot to be negotiated,” Runge-Metzger said. “The only thing we decided in Durban is that everyone needs to make a meaningful contribution and [that] it needs to be enshrined legally.”

“How deep the contribution will be will also depend on the country’s capability and the mitigation potential in that country,” he added.

In an effort to tackle aviation's small but fast-growing contribution to climate change, the European Commission issued a legislative proposal in December 2006 to bring it into the EU's Emission Trading System (ETS).

This involved imposing a cap on carbon dioxide emissions for all planes arriving or departing from EU airports, while allowing airlines to buy and sell 'pollution credits' on the bloc's carbon market, and so reward low carbon-emitting aviation.

The legislation took effect on 1 January 2012. But non-EU governments and airlines have threatened legal action or trade retaliation unless they are granted exemptions. China's official aviation body, the China Air Transport Association (CATA), says that the ETS would cost its airlines $123 million in the scheme's first year, and more than triple that by 2020. The country also claims special dispensation as a developing country.

EU officials say that China has a higher GDP than Greece or Portugal and questions why its businessmen should be exempted from paying the same carbon taxes that others do.

The EU also allows ETS exemptions for governments that take equivalent measures to curb aviation emissions. But Brussels has not said what these might be. China's aviation regulator has already asked all airline carriers to cut their energy and carbon intensity by 22% by 2050.

  • Mid-June: ICAO working group due to propose solution to ETS dispute
  • Mid-June: EU has threatened eight Chinese and two Indian airlines with sanctions for non-compliance with the ETS.
  • November: An ICAO Council is expected to consider the working group proposals
  • March 2013: International airlines must begin buying ETS credits for use in European airspace.


European Commission: EU Emissions Trading System (ETS)

European Commission: Reducing emissions from the aviation sector

International Civil Aviation Organisation: ICAO

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