BRUSSELS Dec 23 Europe's highest court
this week gave its full backing to an EU law, meaning all
airlines will have to pay to offset carbon emissions for flights
in and out of Europe from Jan. 1, drawing anger from the United
States and China.
China's state-run Xinhua news agency warned of a trade war
over the inclusion of airlines in the EU's Emissions Trading
Scheme (ETS), although the foreign ministry stated its
opposition less stridently and called on the European Union to
talk to other governments.
The U.S. government said it was dismayed by the ruling and
wanted the issue to be addressed by the U.N.'s International
Civil Aviation Organization (ICAO).
"We continue to have strong legal and policy objections to
the inclusion of flights by non-EU air carriers in the EU ETS
(Emissions Trading Scheme)," Krishna R. Urs, deputy assistant
secretary for transportation affairs at the U.S. State
In the latest of a flurry of statements from airlines and
their associations, the Association of Asia Pacific Airlines
(AAPA) called on the EU to abandon its plans.
"This dispute needs to be resolved through constructive
political dialogue, rather than embarking on a bruising trade
war," the AAPA said on Friday. "We urge the EU to scrap plans to
include foreign airlines within the EU ETS."
EU Climate Commissioner Connie Hedegaard welcomed the court
decision, while adding she wanted to engage with partners.
"We reaffirm our wish to engage constructively with everyone
during the implementation of our legislation," she said.
The following looks at what might happen next.
RISK OF RETALIATION?
Analysts dismiss the threats of retaliation as rhetoric.
"No one wants to see a trade war. No one wants to pay huge
fines. There is a lot of sabre-rattling," Jean Leston, senior
transport policy adviser at WWF, said.
Before Wednesday's ruling, which had been widely expected,
U.S. Secretary of State Hillary Clinton and U.S. Secretary of
Transportation Ray LaHood wrote to EU officials urging them to
reconsider and threatening unspecified action.
Legislation in the U.S. Congress, if passed, would make it
illegal for U.S. airlines to comply with the EU law, but that
would place airlines in the nearly impossible situation of being
in breach of one jurisdiction whatever they did.
U.S. airlines have said that reluctantly they will comply
with the EU law, although they are considering their legal
The EU penalty for non-compliance is 100 euros ($130) per
tonne of carbon, much more than the cost of compliance.
European Commission figures show complying would add between
2 and 12 euros per passenger, depending on airlines' decisions
about how much to pass on to their customers.
Thomson Reuters Point Carbon data points to a total carbon
cost for the industry of 9 billion euros by the end of 2020.
European politicians have insisted the United States must
comply with EU law just as the EU complies with U.S.
legislation. Global and U.S. campaign groups have written back
to Clinton and LaHood reminding them of the deep-seated U.S.
belief in the rule of law.
"Asking America's allies to back down on strongly-supported
domestic legislation to reduce global warming pollution from
aviation is simply not consistent with the historical U.S.
leadership role on either the environment or the rule of law," a
letter signed by nine environmental organisations said.
The EU's Hedegaard has said she is willing to engage
constructively, but also that the EU will hold firm.
The new law allows for "equivalent measures" to be taken
It told the China Air Transport Association in June there
were provisions in EU ETS rules to exempt airlines of countries
taking equivalent steps to cut emissions.
Analysts said equivalent measures had to reduce carbon
emissions in the airline sector, but were deliberately vague,
allowing room for interpretation.
FURTHER LEGAL AVENUES?
The European Commission consulted widely on its decision to
include airlines in its carbon trading scheme from Jan. 1 2012,
which was agreed in 2008 with overwhelming political support.
The European Court of Justice is Europe's highest court and
there is no right of appeal to this week's decision, although
airline lawyers are seeking grounds for further action.
The court's ruling was very clear. It found the EU law did
not breach national sovereignty and it covered emissions related
to flights under the jurisdiction of the EU.
Lawyers have said it would be extremely difficult to mount a
further legal challenge. They have also said threats of action
before the World Trade Organization were idle and the ICAO was
the only realistic forum.
INTERNATIONAL CIVIL AVIATION ORGANIZATION FINDS A SOLUTION?
Environmental groups say the best possible outcome would be
that the ICAO - which has stalled for more than a decade on
finding a global way to tackle rising levels of airline
emissions - should come up with a solution at an international
"It's time for ICAO to get its skates on and quickly resolve
this. Including aviation in the (EU) ETS was always designed as
an interim measure before we could get a global deal," WWF's
IMPACT ON THE CARBON MARKET?
The carbon market showed little reaction to Wednesday's
announcement, because it was widely anticipated.
Eventually, however, inclusion of airlines in the EU ETS
could have a bigger impact.
Airlines initially would be required to pay for only 15
percent of the carbon they emit and would be allocated free
allowances to cover the other 85 percent.
From 2013 to 2020, airlines are expected to buy about 700
million permits, according to Thomson Reuters Point Carbon data.
($1 = 0.7654 euros)
(Editing by James Jukwey)