Lawyers Do Battle Over Europe’s Emissions Trading Scheme

 - July 18, 2011, 7:40 AM
The European Court of Justice has begun hearing a lawsuit launched by the U.S. Air Transport Association against the European Union’s emissions trading scheme. (Photo: Airbus)

Lawyers acting for European Union states have begun their defense of the application of its emissions trading scheme (ETS) to non-European airlines in response to a lawsuit filed by the U.S. Air Transport Association (ATA). The hearing began at the European Court of Justice on July 5, but the court’s advocate general is not expected to deliver an initial ruling until October 6–less than three months before ETS goes into full effect for aircraft operators on Jan. 1, 2012. The initial ruling will be followed by a later final judgment.

The European legal team has firmly rebuffed ATA’s contention that airline emissions can be regulated only through the International Civil Aviation Organization (ICAO) and that the scheme amounts to a unilateral tax. Attorneys representing the UK in the hearing pointed to established case law relating to the application of safety restrictions to non-EU truck drivers operating into the EU. Lawyers also highlighted precedent involving rules governing foreign oil tankers in the EU.

China has also launched an eleventh hour effort to block the application of ETS to its airlines, signaling that it might be willing to start a trade war over the issue. After making no progress in May with initial negotiations with EU officials, the China Air Transport Association (CATA) called on the Chinese government to “impose much tougher retaliation measures” against Europe. In late June, the People’s Republic reportedly blocked a $3.8 billion order for 10 Airbus A380 aircraft that government-backed Hainan Airlines was set to confirm at the Paris Air Show. CATA estimates that ETS will cost its members almost $125 million per year.

The EU’s position remains that it has no choice but to apply ETS comprehensively to air transport to meet its legally binding commitments to reduce carbon emissions under the Kyoto Agreement. ICAO has repeatedly failed to agree to an enforceable multilateral plan to reduce emissions. The EU has said that it will exempt carriers from any country that applies its own equivalent to ETS, which the U.S. has notably declined to do. On July 9, the Australian government announced plans for an ETS, but it is unclear when or if this would apply to air transport. China says that it intends to apply ETS to manufacturing and energy industries in six of its regions from 2013, but it has no plans to extend this to airlines.