Threat of global trade war over airline

Chinese airlines have cancelled $14bn (£8.8bn) of orders with European aircraft manufacturer Airbus following the introduction of the charges and a senior Indian official has now warned there are "lots of measures" that India could take if the EC does not back down. "The question is, are you [the European Union] provoking the world into a trade war?'," the official told Reuters. The EU Emissions Trading Scheme (ETS) requires airlines flying to or from Europe to buy carbon permits to offset their emissions from January 1 this year. However, non-European governments are furious that the charges cover the entire flight and not just European aerospace. It is understood that India has told its airlines not to buy carbon credits from Europe or share emissions data, although it has not ordered the cancellation of orders from Airbus, which dominates the Asian aerospace market. India is also prepared to impose steep charges on European airlines to fly into India if Indian airlines are blocked from flying into Europe because of the ETS. "We have the power of the economy. We are not bleeding as they are," the Indian official added. Airlines are due to receive their first charges under the scheme in April next year, therefore there is still time for a compromise agreementThe US, Russia, and Thailand have also criticised the ETS, while European airlines and Louis Gallois, the chief executive of Airbus's parent company EADS, have warned it is hurting profits. However, the EC says it will only change the legislation if there is an "ambitious" global agreement to cut carbon emissions from airlines. Europe's strategy for cutting carbon emissions was also criticised by the car industry today. Stefan Jacoby, the chief executive of Volvo Car Corporation, said European manufacturing jobs and investment in research and development are under threat because governments are not financially supporting new technologies. "European car manufacturers are facing a very difficult challenge when CO2 legislations requiring electrified cars are implemented without initiatives that make these cars affordable for a growing number of consumers," he said.