China’s $4bn Airbus Order Marks First Since Emissions Spat Began

by | Aug 31, 2012

China yesterday agreed to buy 50 Airbus planes from Franco-German parent company EADS in a deal worth up to $4 billion, the first major order since an emissions trading dispute erupted earlier this year between the European Union and Beijing.

State-owned airline ICBC signed an agreement with EADS during Chancellor Angela Merkel’s visit to Beijing on Thursday, Reuters reported. The emissions spat, which has threatened to spiral into a trade war, has derailed deals worth up to $14 billion.

The dispute began early this year after the EU’s Emissions Trading Scheme extended its mandatory cap-and-trade rules to global airlines, a move that China, the United States and other countries argued was unreasonable and cost prohibitive. China Air Transport Association members, which include the three major state-owned carriers Air China, China Southern Airlines and China Eastern Airlines, refused to meet the EU’s March 31 deadline for handing over carbon emissions data.

The ETS authorizes EU member states to fine airlines for non-compliance or take other action such as impounding aircraft. China threatened in June to take counter-measures that could include impounding European aircraft, if Chinese airlines are penalized for not complying with the EU’s cap-and-trade scheme.

While China’s agreement with Airbus hints at softening of views, the government continues to block the purchase of some larger aircraft in protest of the EU carbon emissions reduction rules.

The 50-plane order was primarily short-range jets, including Airbus’ A320neo, a narrow body plane designed to increase fuel efficiency. The A320neo, which will enter into service from late 2015, incorporates large Sharklet wing-tip devices and a new engine, which together will deliver up to 15 percent fuel savings, Airbus said.

The A320neo, which is part of Aibus’ A32 family of planes, includes two metric tons of additional payload, up to 500 nautical miles more range, lower operating costs and reductions in engine noise and emissions, the company said.

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