China Refusing to Pay EU Airspace Carbon Tax

China is prohibiting all of its airlines from paying the EU's new carbon tax, a standoff that is likely destined for a World Trade Organization unfair trade practice suit, reports the BBC. The long-planned European Union's Emissions Trading Scheme came into effect the first of the year, and it charges all airlines in European airspace for their carbon emissions. But the scheme has been heavily criticized by many outside the EU, including Canada, the US, and China, whose officials argue that the airline industry cannot afford a new expense. China's airlines alone could face charges of up to $124 million annually for their share of EU carbon taxes.

"The airline industry as a whole has already been hit by high fuel costs in the past couple of years and no one wants additional costs," said one industry analyst. With China refusing to pay, all eyes are on the EU to see its response. Experts fear European retaliation, such as barring Chinese flights, would only cause China to ramp up tensions. "Both sides have claimed that this is either fair or unfair, so it is very difficult to see how this is going to shape up," said an expert, who expected the case would have to be resolved by an international body, such as the WTO. (More China stories.)