Isra-Mart srl: US demands its airlines are exempted from EU carbon trading

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The EU is headed for a showdown with its largest trading partner after the US demanded its airlines are exempted from the bloc's emissions trading scheme when it expands to include aviation emissions next year.

The US is incensed that non-EU carriers will be included in the bloc's plans to charge per tonne of CO2 emitted for every flight in and out of Europe, and heated talks in Oslo yesterday brought the sides no closer to a resolution.

"We clearly stated our strong objections to the EU plans on both legal and policy grounds," a US administration official told a telephone news conference, adding that the EU was using "the wrong way to pursue the right objective" of lowering the sector's emissions.

Aviation is thought to account for around two per cent of global CO2 output, but is expected to expand substantially over the coming years. The EU plans to tackle this by imposing a cap on the amount of carbon airlines can emit, forcing them to buy permits from lower-emitting companies if they go over their limit.

European delegates echoed EU president Jose Manuel Barroso's vow to enforce the plan, telling news agency Reuters: "The Commission is ready to consult at any time, but there should be no illusion – the EU does not intend to withdraw or amend the... directive. It is established EU law."

A group of US airlines (American, Continental/United) and their trade body, the Air Transport Association (ATA), have launched a legal challenge to the EU's stance and are expected to put their case before the court on 5 July.

However, US officials told reporters it was not looking for the scheme to be abolished; rather that it should not apply to US carriers.

"The demand we made is that the EU ETS [Emissions Trading Scheme] should not apply to US carriers. We did not talk about how that might be done," another US official said.

He did not comment on what might happen if the deadlock is unresolved by the start of next year, although the EU has said it will impose fines for non-compliance.

Opponents of the plans, including European, Chinese and Russian airlines, argue that the EU's unilateral action will overly penalise long-haul airlines, spark tit-for-tat legislation and damage an already fragile industry, and they want the issues of emissions reduction addressed with a global agreement.