Major Air Carrier Nations Oppose EU Emissions Trading Schemes

With less than two months to go before the European Union’s controversial Emissions Trading Scheme (ETS) takes effect for air transport, non-European nations are starting to take action to prevent application of this scheme to non-EU carriers. Beginning January 1, 2012, the ETS would require airlines – whether they are European or not – to have emissions “credits” in order to operate into the EU. These credits must cover the entire estimated amount of CO2 that the operation is expected to emit. The ETS has been in force since 2005 for other industries, including ground transport, but until now it has not been applied to air services.

The part of the system that non EU-carriers and nations find most objectionable (there are several other grounds for objection) is that the rules will apply to the entirety of a direct flight, including the portion that is not over EU territory. For example, a Los Angeles-London flight will be assessed for the emissions made for the 5300 miles that it traverses in US and international airspace, as well as the comparatively few miles of European airspace it will cover. This has been objected to in the strongest terms by US industry and government, joined by numerous others. Nations opposing the EU have insisted that the only appropriate forum for adopting international rules is ICAO, and that body has been working diligently to formulate such a regime.

Earlier this year, US carriers and the Air Transport Association filed suit against implementation in the United Kingdom High Court of England and Wales, claiming, among other things, that this aspect of the ETS is an extraterritorial extension of EU power, in violation of international law. They also asserted that member states of ICAO have no power to act unilaterally on matters that, under the Chicago Convention, should be dealt with by ICAO. The High Court requested that the European Court of Justice (“ECJ”) issue a preliminary ruling on the validity of the ETS, and on October 6, an Advocate General of the ECJ, Juliane Kokott, issued such a ruling finding against the carrier’s complaints.

In her opinion, AG Kokott specifically determined that the ETS is consistent with international law. She further opined, in fact, that the “fair and equal opportunity” provision of the US-EU Open Skies Agreement requires imposition of the ETS on foreign carriers, in order to avoid discrimination against European carriers. The Court’s preliminary ruling was unsurprising to observers familiar with the Court, and is expected to be formally adopted by the judges of the Court shortly. This effectively bars further private action against the rules, leaving the field only to governmental action.

In response to this ruling, the US House of Representatives on October 24 approved a bill (HR 2594) that would make it illegal for US carriers to comply with the ETS. This would put US carriers in the very awkward position of having to decide whether to obey EU law, or US law, and most observers give it little chance of being enacted. The bill was received in the US Senate on October 31 and has yet to undergo committee review there.

The most recent development was the adoption last week (November 2) by the Council of the International Civil Aviation Organization (ICAO) of a declaration put forward by India and 25 other ICAO member states, including the United States (the Council has 36 member states). The resolution condemns the EU’s action as unilateral and inconsistent with the Chicago Convention and international law. The declaration itself, however, is non-binding, and will surely be ignored by Europe. The only truly effective weapon that ICAO can wield is an action under Article 84 of the Convention. This is tantamount to the “nuclear option,” and is almost never invoked. If a violation is found under Article 84, Article 88 requires that ICAO “shall suspend” the voting rights of the violating member states in the ICAO Assembly and Council.

An Article 84 case was brought in 2000 by the United States against the EU over its ban of jet engine “hush kits” used to bring older-model aircraft into compliance with European noise regulations. It was used in that instance as a very last resort, after months of lobbying by US officials at the highest levels. (President Clinton personally raised this issue with European leaders on at least three occasions.) When it became clear that the Council would decide against the EU, an settlement was reached on a “balanced approach” to environmental matters.

The United States, while keeping a comparatively low profile in this case, has actively conscripted support from other countries for opposition to the ETS. However, there is no reason to believe that the EU will cave in to the pressure of a non-binding resolution – it has essentially already said so. Thus if the opposing nations are serious about stopping the extraterritorial application of the ETS, the only option is an Article 84 case.

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