Isra-Mart srl: Suit Over EU Emission Trading Heads To Court Tuesday

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The U.S. airline lawsuit challenging the inclusion of non-European carriers in the EU’s Emissions Trading System (ETS) gets its day in court Tuesday in Luxembourg in what is shaping up as a showdown over international law and perhaps the extent of a region’s right to regulate pollution in its skies.

Effective Jan. 1, 2012, all airlines flying into and out of the EU will be brought into the EU’s cap-and-trade-based ETS, which seeks to reduce industrial greenhouse gas emissions. Launched in 2005, the EU ETS already covers power companies, oil refineries, steel works and other industries.

The emissions cap to be imposed on airlines is based on average annual emissions for the years 2004, 2005 and 2006 on all flights to and from European airports. The cap in 2012 amounts to 97% of that historical average, and goes down to 95% of that amount in 2013-2020. Airlines will be given roughly 80% of their emissions allowances, each representing a ton of carbon dioxide, for free and will have to buy or trade for the rest. At the end of the year, they will need to have enough allowances to cover all of their emissions covered by the ETS or be fined.

The Air Transport Association (ATA), which brought the suit in late 2009 with members United Airlines, Continental Airlines and American Airlines, believes that the EU’s “unilateral” application of the ETS to non-EU carriers violates international law. “We believe the airline greenhouse gas emissions should be addressed under a global approach, rather than through a unilateral action by the U.K. government or EU governments,” ATA says in online documents that explain its position.

More specifically, ATA holds that the application of the ETS to non-EU airlines violates several provisions of the Chicago Convention. ATA also sees the ETS as trying to regulate U.S. airlines in U.S. airspace even though a flight from the U.S. to Europe might only be in EU airspace for a short amount of time before landing.

The EU requirements also interfere with the International Civil Aviation Organization’s (ICAO) authority to regulate flights over the high seas, ATA says. In addition, fees imposed on U.S. carriers under the ETS are “contrary to the limitations imposed by the Chicago Convention and the air service agreement between the U.S. and the EU on the types of taxes and charges on country can impose the airlines of another,” the trade association says.

Proponents of including non-EU carriers in the ETS dismiss ATA’s claims. “Our perspective is that the mere consideration of fuel use and passenger weight as parameters in a broader scheme requiring some accountability for greenhouse gas emissions is not application of European law outside the boundaries of the EU,” Pamela Campos, an attorney with the Environmental Defense Fund, said during a recent media briefing.

Campos also said airlines have argued that the ETS violates the Kyoto Protocol because the EU has acted on a regional basis. “We disagree with that view and also find it quite remarkable that we have American airlines that have been active in pushing back against participation in any of these international and multilateral efforts now trying to invoke those in their own defense in a foreign court,” she said.

Objections to the ETS are not limited to U.S. carriers. The Obama administration weighed in June 22 with its opposition, saying the EU has the right objective, but has taken the wrong approach.

Also, developing countries such as China and India were exempt from the landmark Kyoto Protocol agreement on climate change. But the EU has not exempted developing countries from the ETS. China has signaled that it may take more drastic, punitive action against this development. Last week, the Chinese government canceled an order for Airbus A380s ostensibly due to its objection to the country’s airlines’ inclusion in the ETS.

Pleadings in the ATA suit are scheduled to be presented before the Grand Chamber of the European Court of Justice in what is expected to be a day-long hearing. After the hearing, the court’s Advocate General will begin preparing what is essentially a preliminary opinion, which could be released by early fall. The full court’s decision would follow several months later.