Russia has raised the stakes in the increasingly bitter dispute over the European Union’s imposition of its controversial emissions trading scheme (ETS) by refusing to grant new overflight rights to Finnair and abandoning a commitment to allowing new rights to be issued free of charge. The Russian government confirmed that it had deliberately singled out Finnair for punishment as an EU-based carrier and that it intends to punish other EU airlines in the same way—probably starting with Scandinavian Airline System, since Russia is currently in a standoff with the governments of Sweden, Norway and Denmark over traffic rights.

The European Commission has protested the move, saying that Russia is now in breach of its obligations as a new member of the World Trade Organization. So far, the WTO has given no indication as to whether it will take Russia to task for abandoning its commitments to free up overflight rights.

Meanwhile, the China Air Transport Association has said that the Chinese government will start impounding EU airliners if European officials start punishing Chinese airlines for their officially sanctioned defiance of the requirement to comply with ETS monitoring, reporting and verification of carbon dioxide emissions.

At least 10 non-EU airlines—understood to be from China and India—refused to meet an EU compliance deadline of March 31, 2012. EU climate commissioner Connie Hedgaard has given non-compliant airlines until June 15 to submit CO2 data and has threatened them with unspecified enforcement action if this doesn’t happen.

India also has declared that it will start withdrawing overflight rights from EU carriers if these threats materialize.

Meanwhile, the U.S. Senate continues to debate proposed legislation that would prohibit U.S. aircraft operators from complying with ETS, while requiring the U.S. government to take action to protect them from any enforcement action against them by the Europeans.