The United States, India, Russia, China and others have threatened to retaliate against the EU for including their carriers in the ETS. A group representing Chinese airlines says it will ignore Europe's framework for taxing carbon emissions in the aviation industry. Indian government said it was studying a number of procedures to combat imposing carbon tax by EU. The inclusion of airlines into the EU's Emission Trading Scheme (ETS) hasn't gone down well with carriers based outside the bloc. China and the US oppose the measure, but their legal prospects to stop it look bleak. Airlines remain unhappy about the EU's carbon emissions scheme. Both in Europe and abroad carriers are fighting their inclusion in the scheme, which obliges any flight that takes off or lands in the EU to compensate at least part of its journey's emissions via the ETS. Though aviation accounts for less than 5 per cent of human emissions, the industry's growth rate and dependence on kerosene could see that share triple within three decades. However, an airline industry study of the impact of Europe's carbon levies on US carriers is challenging their claims that it will burden the sector with "exorbitant" costs. The study, published this week in the Journal of Air Transport Management, suggests American airlines could reap the kind of windfall profits showered on European utilities when they first entered the emissions trading scheme (ETS), which aims to reduce the greenhouse gases blamed for climate change. US carriers could make profits of up to $2.6 billion (2 billion euros) thanks to the extent of free emissions allowances they will receive, said the study, which was partially funded by the US Federal Aviation Authority. Late last month, the EU Court of Justice struck down US airlines' legal challenge to the EU's right to include foreign carriers in ETS, clearing the way for the rules to come into effect on 1 January. The rules set a cap on airline emissions based on 2004 estimates of the industry's climate impact. EU governments will grant airlines 85 per cent of the allowances they require for the first year of the programme. The airlines will have to bid for the remaining 15 per cent of allowances, a proportion that will increase in years ahead. Lufthansa has already warned passengers of increased prices under the scheme. The airlines said it had begun adding a fuel surcharge to cover the costs of the ETS. Lufthansa anticipates the ETS to cost it 130 million euros a year, but added that it was difficult to produce precise figures due to the carbon market's "volatile" nature "We calculate that we now do not need 100 per cent, but actually 115 per cent of the allowances that must be surrendered next year," said Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines.
