UPDATE 4-Foes of EU airline CO2 rules agree on tactics
* Countries' options include barring airline participation
* Russian hosts among those considering ETS ban
* EU, IATA look to U.N. organization for global solution (Adds U.S. comment, paragraphs 3, 14-15)
By Jennifer Rankin
MOSCOW, Feb 22 (Reuters) - Countries opposed to an EU law forcing the world's airlines to pay for greenhouse gas emissions agreed on a basket of retaliatory measures, adding to a series of threats that have raised the prospect of the globe's first carbon trade war.
But the EU dismissed the threats as "hypothetical" and Russia's deputy transport minister also said the countries -- which include China, India and the United States -- were free to choose which of them they would actually use.
In Washington, the State Department said it would be "premature" to discuss specific retaliatory measures and voiced hope that the European Union would reconsider its carbon emissions scheme.
The array of potential steps include barring national airlines from participating in the EU program, lodging a formal complaint with the United Nations' International Civil Aviation Organization (ICAO), ceasing talks with European carriers on new routes and imposing retaliatory levies on EU airlines.
"Every state will choose the most effective and reliable measures that will help to cancel or postpone the implementation of the EU ETS (Emissions Trading System)," Valery Okulov, whose ministry hosted the meeting attended by more than 20 nations, told a news conference.
Russia has a particular measure it can use against Europe. Okulov, the former chief executive of Aeroflot, said Russia could take out an old weapon against European carriers: overflight fees on routes over Siberia.
Russia rescinded the onerous fees during the last decade, a move it linked to long-running talks for World Trade Organization membership, which it received late last year.
Since the start of this year, all airlines using EU airports are required to buy permits under the ETS, although they will not actually face a bill until next year. In addition, they will at first be handed 85 percent of allowances for free.
The European Commission reiterated it was standing by its law and said the Moscow meeting had delivered only negatives.
"Unfortunately, our question for Moscow meeting participants remains unanswered: What's your concrete, constructive alternative?" Climate Commissioner Connie Hedegaard said in a tweet.
Factbox on airlines and the EU scheme:
Q+A-Will Moscow talks unleash a carbon trade war against EU?
Those opposing the program have debated the issue within the official ICAO framework and also in informal talks -- dubbed "the coalition of the unwilling" -- such as the two-day Moscow meeting, which ended on Wednesday.
Okulov said Saudi Arabia would organize the next unofficial meeting later this year.
Many nations and the EU have said the best arena to resolve the dispute would be the ICAO, which has been working on developing its own plan to curb rising aviation emissions.
Mark Toner, a spokesman for the U.S. State Department, said Washington still hopes the EU will reconsider.
"The U.S. position on the inclusion of its airlines in this emissions trading scheme has been very clear and consistent. We believe that the EU needs to cease application of this scheme to foreign airlines and engage meaningfully with the International Civil Aviation Organization to find and develop a global approach to this problem," he said.
The EU has always said it would have no need to make all airlines using its airports pay for carbon under its ETS if a comprehensive global program were in place.
At a regular briefing in Brussels, Isaac Valero-Ladron, EU spokesman for climate action, reiterated that the EU "will review its legislation if there is an ambitious global agreement in force because we would be covered by this agreement."
Russia is among those to agree that the best forum would be the ICAO, but it still took a tough line at the Moscow talks.
"We have demonstrated our determination to ask for a cancellation or postponement of the EU ETS" in regard to airlines, Okulov said.
For all the talk, there were hints of a softening.
A list of signatories seen by Reuters showed only 23 nations, compared with 26 at earlier "coalition of the unwilling" talks.
The final "Moscow joint declaration" also dropped proposals from an earlier draft, including sending a letter to the EU stating individual nations' inability to join the EU ETS, as well as a clause on reopening trade agreements in other sectors to pressure EU industries.
As had been expected by many observers, the meeting also stopped short of invoking the ICAO'S formal dispute resolution procedure, a lengthy process which could delay the quest for an ICAO-based global program.
But feelings are still running high over what some nations view as an infringement on sovereignty.
China's central government State Council, or cabinet, earlier this month said all airlines were barred from taking part -- unless they had received government approval to do so.
The Commission has noted Chinese airlines have already signed up to a registry for eligibility for free allowances, while airlines have already begun passing on the extra costs to passengers through fare increases.
Representing the airlines, the International Air Transport Association called on the EU to be "sincere facilitators at ICAO" in the quest for a global framework.
"We don't want a trade war. But Europe's unilateral and extra-territorial EU ETS plans are clearly not acceptable to non-EU governments," Tony Tyler, IATA's director general and CEO said in remarks emailed to Reuters. (Additional reporting by Barbara Lewis in Brussels and Andrew Quinn in Washington; Writing by Melissa Akin; Editing by Elizabeth Piper, William Hardy and Gerald E. McCormick)
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