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European Court Opinion: U.S. Airlines Must Buy Carbon Allowances

| Wednesday October 12th, 2011 | 0 Comments

Europe’s highest court released an opinion on October 6th, finding that the proposed mandatory inclusion of non-European based airlines in the European Emissions Trading Scheme (ETS), is compatible with international law. The opinion by the Advocate General constitutes the latest development in the ongoing dispute.

Under the EU Emissions Trading Scheme, beginning on January 1st 2012, all carriers must procure a carbon allowance for every tonne of CO2 emitted for all flights which either take off or land, in the European Union.

Last week, we reported that the EU will allocate 85% of these allowances to carriers for free, while the remaining 15% will be auctioned. A more detailed analysis of how the scheme will operate can be found here. The European Commission estimates the cost for compliance will add between $2.66 and $15.96 per ticket over the next decade.

What are the implications of this decision?

Firstly, the court’s opinion is a blow to the Air Transport Association (ATA) of America, who along with certain US based carriers had brought the lawsuit against the European Court of Justice. The lawsuit claimed the E.U. law infringes on the sovereignty of other states, and is illegal under international law.

Last Thursday’s decision however, might allay the concerns of certain European carriers who were holding that it would be unfair on them if the court granted any exemptions to non-European based airlines. At the same time though,  it will not diffuse transatlantic tensions over the matter, and as the Washington Post reports, the ATA has said it does not mark the end of the case;  technically true, since the opinion of the court’s Advocate General is not a binding one – though it does often influence the final outcome of a case.

The law is not just unpopular with the United Sates. The Economist reports that last month 21 governments, including those of America, China, India and Japan, signed a declaration rejecting the EU’s plan, calling on it to back down from imposing airline emissions-trading unilaterally, and instead to support efforts to set up a worldwide scheme. The next step could be that  one of the 21 countries objecting to the scheme, will make a complaint to the UN’s International Civil Aviation Organization (ICAO).

The saga continues.

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