Having the US and China on the same side of a trade dispute is a rare sight. But the decision by the European Union to extend to the aviation industry its emissions trading scheme has brought about an alliance of rivals.

The scheme obliges airlines to buy tradeable permits to emit carbon dioxide for any flight in or out of Europe. Such permits will be proportional to the entire length of any flight, not just the part of it that is in EU airspace. Since the Chinese government believes that Europe is trying to levy taxes beyond its territorial limits, Beijing has barred its country’s airlines from complying. The US House of Representatives has expressed a similar view.

There are many good things about the EU scheme. While aviation only accounts for 2 per cent of global greenhouse emissions, these are expected to grow by 3-4 per cent per year. And since the EU has imposed similar caps on other industries, it is reasonable that it does so on a sector whose importance, in terms of emissions, is ever increasing.

The cost to the airline industry is limited. The overall allocation of permits is generous and, in the first year, airlines will only pay for 15 per cent of those they need. Were they to pass on these costs to their passengers, the additional charge for a transatlantic flight would be in the region of €10 a head.

One can sympathise with the objections raised by the temporary Sino-American bloc. The EU scheme appears at odds with the terms of the Chicago Convention, which has regulated air travel since 1944, and which limits the reach of sovereign levies over foreign airlines. Moreover, Europe’s unilateral approach appears to go against the generally co-operative spirit in which aviation has been regulated across borders.

Emissions, of course, were not a hot issue at the time the treaty was conceived, and more recent attempts to introduce controls have foundered. The merit of the European move is that it at least puts the issue firmly on the table. And there is still a chance to cut a deal. Since no payment to the scheme is due until 2013, the coming months present a window of opportunity, which both airlines and governments should take.

One more effort at international dialogue would have the advantage of easing tensions, which threaten to escalate into a trade war. But any deal should be no less ambitious than the EU’s proposal. A watered-down agreement would be unwelcome.

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