Down But Not Out: US Continues to Fight EU Court Ruling on Airline Emissions Scheme

Three of the hidebound emissions holdouts that tried the world’s patience during and after COP-17 in Durban -- the United States, Canada, and China -- are opposing a judgment released on Dec. 21, by the highest court in the European Union, the European Court of Justice (ECJ). The Luxembourg-based tribunal ruled in favor of a directive under which, beginning Jan. 1, the EU will charge airlines for carbon emissions on flights to and from the continent.

Specifically, nearly 4,000 airlines and other aircraft operators flying to and from European Union airports will have to buy permits, if they exceed their carbon allowances under the EU's emissions trading scheme (ETS) starting in 2012; however, the first “invoices” will not be sent out until April 2013. 

The carbon cap will be based on the industry’s average CO2 emissions from 2004 through 2006. Currently, the cap is intended to limit the industry as a whole to 97 percent of this figure in 2012, with increasing constraints in the future. Airlines’ allowances, however, initially will be based on their individual emissions, with the figures calculated from the beginning of January. According to the EU’s estimates, the scheme would add around 12 euros (US $16) to the current cost of a transatlantic flight.

However, four Chinese airlines that opposed the directive -- Air China, China Eastern Airlines, China Southern Airlines, and Hainan Airlines --  said that the EU’s estimate was low and their actual costs would total 95 million euros (US$124 million) annually. The carriers have support from the China Air Transport Association (CATA), which claims that costs would keep rising as flights increase between China and Europe.

Indeed, according to Thomson Reuters Point Carbon, the cost for airlines of joining the European Union’s Emissions Trading Scheme in 2012 will be approximately €1.1 billion (US$ 1.4 billion), using a carbon price of €12 (US $16) per ton -- or a total of €10.4 billion (US$ 14 billion) between now and the end of 2020.

EU Commissioner for Climate Action Connie Hedegaard commented, ''I am, of course, very satisfied to see that the court clearly concluded that the EU Directive is fully compatible with international law. A number of American airlines decided to challenge our legislation in court and, thus, abide by the rule of law. So now we expect them to respect European law. We reaffirm our wish to engage constructively with everyone during the implementation of our legislation."

In reaction -- even before the verdict came down -- the United States took the offensive. The U.S. House of Representatives passed a measure in November directing Transportation Secretary Raymond LaHood, “to prohibit operators of civil aircraft of the United States from participating in the European Union’s emissions trading scheme,” if it were to come into force.

In a follow-up Dec. 16 letter to EU officials, U.S. Secretary of State Hillary Clinton and Transportation Secretary LaHood urged the EU "to reconsider this current course,” and warned that, ”Absent such willingness on the part of the EU, we will be compelled to take appropriate action."

In the case, Air Transport Association of American and Others v Secretary of State for Energy and Climate Change, the industry had contested the emissions trading scheme on the grounds that it would infringe on:

·         The Chicago Convention,  the Kyoto Protocol—and the Open Skies Agreement, in particular— because it imposes a form of tax on fuel consumption; and

·         Certain principles of customary international law, in that it seeks to apply the allowance trading scheme beyond the European Union’s territorial jurisdiction

Not so, said the EU. “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, " the ECJ decided, adding that “application of the emissions trading scheme to aircraft operators infringes neither the principle of territoriality nor the sovereignty of third States, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the Member States of the EU.” No ECJ decision can be appealed.

The ruling was condemned by Airlines for America, the U.S. industry trade body, which brought the action, in a formal statement: “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.” The industry group said it would “comply under protest,” pending any further possible legal action.

The case against the EU originally was brought to the London High Court of Justice by the Air Transport Association of America, American Airlines and United Continental , but the London court referred it to the ECJ in Luxembourg.

A coalition of environmental groups -- including three from the United States (Center for Biological Diversity, Earthjustice, and Environmental Defense Fund) and three from the EU (Aviation Environment Federation, Transport & Environment, and WWF-UK) -- cheered the hotly contested ruling, stating, “Today's decision, from the highest court in the European Union, makes clear Europe’s innovative law to reduce emissions from international flights is fully consistent with international law, does not infringe on the sovereignty of other nations, and is distinct from the charges and taxes subject to treaty limitations.”

"This ruling doesn't mean the political battle is over," Thomson Reuters Point Carbon’s Associate Director Andreas Arvanitakis said. "Rather, it will move to other grounds, possibly with retaliatory trade measures or complaints brought through the ICAO [International Civil Aviation Organization, a branch of the United Nations].”

Indeed, many air carriers and nations outside the EU are saying that a piecemeal approach, region by region, will not work, and are looking to the ICAO for next steps.

"At this time of economic uncertainty, actions should not come at the price of international aviation, which plays such an important role in all of our economies," Canada’s Transport Minister Denis Lebel wrote to Slim Kallas, vice-president of the EU Commission for Transport

Meanwhile, GreenAir Online reports that U.S. Department of Transportation issued an order against nine European carriers earlier this week, requiring them to submit traffic and carbon allowance data to it by specified dates. An order has also been served on seven U.S. airlines, requesting similar data and additional financial information on allowance costs and income.  The orders do not specify why they require such details and what they will be used for --  but the inference is that it will help inform potential retaliatory financial measures on EU airlines flying to the United States.