European Court Upholds Air Emissions Trading Scheme - Business Travel News

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European Court Upholds Air Emissions Trading Scheme

December 21, 2011 - 12:10 PM ET

By David Jonas

The Court of Justice of the European Union "confirmed the validity" of including aviation in the EU Emissions Trading Scheme, effective Jan. 1, 2012. As part of ETS, all airlines operating to or from EU airports will be allocated a quota of annual emissions permits for their flights and will be required to purchase more if they exceed their quotas, requirements that could pressure carriers to raise ticket prices. According to various reports, however, carriers would not be charged for most of their first-year quotas.

ETS has been opposed by various governments, airlines and trade associations around the globe, sparking fears of possible trade wars between Europe and other countries.

U.S. Department of State deputy assistant secretary for transportation affairs Krishna Urs issued a statement opposing today's court decision: "We continue to have strong legal and policy objections to the inclusion of flights by non-EU air carriers in the EU ETS. We urge the EU to work with its international partners in the International Civil Aviation Organization to address the valid concerns that have been raised by the international community."

Recently renamed from the Air Transport Association, Airlines for America in a U.K. court argued that ETS infringed on international law and several international aviation treaties and environmental agreements. The U.K. court referred the case to the European Court of Justice, which found ETS infringes on "neither the principle of territoriality nor the sovereignty of third states." It also concluded that "the uniform application of the scheme to all flights which depart from or arrive at a European airport is consistent with the provisions of the Open Skies Agreement designed to prohibit discriminatory treatment between American and European operators."

Airlines for America stated that "today's court decision further isolates the EU from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change.

"Today's decision does not mark the end of this case, and Airlines for America is reviewing options to pursue in the English High Court," the association continued. "In the meantime, Airlines for America members will comply under protest."

The International Air Transport Association, which estimated the cost of ETS at €900 million in 2012 and €2.8 billion by 2020, also expressed disappointment. "The success of Europe's plans will depend on how non-European states view its legal and political acceptability," according to an IATA statement. "In this respect, there is growing global opposition." IATA cited a recent ICAO council resolution supported by 26 countries (including China, Russia and the United States) that "urged Europe to take a different approach"; reports that India has "instructed its airlines not to comply"; and resistance in the United States.

The U.S. House of Representatives in October, for example, approved a bill that would ban U.S. carriers from participating in EU ETS. The bill also calls on U.S. government officials to "use their authority to conduct international negotiations and take other actions necessary to ensure that operators of civil aircraft of the United States are held harmless from any emissions trading scheme unilaterally established by the European Union."

Because ETS would require airlines to pay for emissions generated from the entirety of flights arriving or departing EU airports—including the portions of those flights not in EU airspace—the House said EU's "extraterritorial action is inconsistent with long-established international law and practice." The House bill also suggested that EU's action "undermines ongoing efforts at the International Civil Aviation Organization to develop a unified, worldwide approach to reducing aircraft greenhouse gas emissions and has generated unnecessary friction within the international civil aviation community."

A similar bill introduced this month in the U.S. Senate has been referred to the commerce, science and transportation committee.

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