Europe Faces Retaliation as Court Rules Against ETS Appeal

 - December 26, 2011, 10:00 AM
The European Court of Justice in Luxembourg has ruled that foreign airlines must comply with the emissions trading scheme.

The European Union (EU) appears to be on a political collision course with the United States and other leading nations after the European Court of Justice in Luxembourg blocked an appeal by Airlines for America (A4A) against the imposition of the emissions trading scheme (ETS) on non-European airlines.

The December 21 decision did no more than confirm a provisional ruling made in October, but the ECJ completely rejected any argument that ETS infringes on the sovereignty of other nations and insisted that the cap-and-trade scheme is consistent with international law. A4A said it is reviewing options for further legal action in the UK High Court, while noting that for the time being its members will comply with ETS when it comes into force on January 1. However, since the original appeal started in this court before being referred to the ECJ, it is hard to see how this legal avenue could remain open.

Political action over ETS now seems likely to shift to the U.S. Senate, where the Committee on Commerce, Science and Transportation is considering the European Union Emissions Trading Scheme Prohibition Act. The act, which mirrors a bill already passed by the House of Representatives, would make it illegal for U.S. operators to comply with ETS and would require the U.S. government to help them in the event they face penalties for noncompliance.

Meanwhile, the Obama Administration has signaled that it is ready to turn up the political heat on the EU. In a December 16 letter leaked to the Financial Times, Secretary of State Hillary Clinton warned the European Commission that if it does not lift the application of ETS to U.S. carriers then the U.S. government will be “compelled to take appropriate action.” The State Department has not divulged what form this action might take, but it has said that it continues to have “strong legal and political objections” to the application of ETS to non-European carriers, adding that it does not consider the ECJ ruling “as resolving these objections.”

According to the State Department, 42 states are now united in their opposition to the ETS, including Russia, China, India, Japan and Brazil. The Chinese government reportedly has already blocked one order for Airbus airliners by a state-owned airline, and it and other governments have not ruled out taking trade sanctions against EU companies in retaliation over ETS.