Unless it is renegotiated and resolved, the European Union’s emissions trading scheme (ETS) may degenerate and lead to far-reaching damage to the traveling public and trade relations between countries, according to Andrew Herdman, director general of the Association of Asia Pacific Airlines (AAPA).

“It would be foolish for both sides to get into a situation that starts with principle and degenerates into a tit for tat,” Herdman told AIN. “We are nervous about the notion of retaliatory measures [by both sides]. Before it gets worse, governments in Europe should resolve this issue.”

Asia’s frustration with the ETS is clear. The Civil Aviation Administration of China (CAAC) has just banned its airlines from paying the charges on carbon emissions imposed by the EU, and also from increasing charges to its customers without government permission. India too has asked its airlines not to liaise with foreign governments. This could, however, create a difficult situation and a conflict for airlines between breaching the EU law and country law.

It is estimated that around 4,000 airlines and other aircraft operators face the prospect of paying the EU for their carbon emissions. While the emissions trading market is volatile, AAPA estimates at $25 per metric ton, the ETS could cost Asian carriers alone some $200 million a year. “As traffic grows in Asia, this could go up to $400 million by 2020,” said Herdman.

For the most part, Asian carriers are complying with ETS under protest as they fear draconian penalties such as the EU’s right to ban offenders from its airports. The EU’s decision to charge flights into and out of EU airports for carbon emission runs contrary to relevant principles of the United Nations Framework Convention on Climate Change and the international civil aviation regulations, claimed Herdman.

So, is it a point of no return? “Europe has overreached. It will have to scale back the scheme by postponing or suspending it a couple of years waiting for ICAO to come up with a global framework,” he added. But, EU officials counter that the International Civil Aviation Organization, largely under U.S. influence, has been procrastinating and prevaricating about reducing aviation’s carbon footprint for years. The EU has always said it would exempt operators from any country that implements an equivalent program, but so far none has done so. Herdman conceded that this offer has not been defined clearly enough.

While not disputing ICAO’s poor record on coming up with a multilateral alternative to ETS, Herdman insisted that this does not excuse Europe’s hard-line position. “The principle is of sovereignty and jurisdiction. Europe is a tax collector [operating] outside its borders,” he concluded.