AIRLINES MAY GET HIT WITH CO2 TAX
Airlines May Lose Battle Over EU’s CO2 Caps at Top Court
October 06, 2011, 9:02 AM EDT
By Stephanie Bodoni
(Updates with comment from EU, aviation groups starting in seventh paragraph.)
Oct. 6 (Bloomberg) — International airlines should lose a challenge to the European Union’s planned expansion of its carbon cap-and-trade system beyond the bloc’s borders, an adviser to the region’s top court said.
“The inclusion of international aviation in the EU emissions trading scheme is compatible with international law,” Advocate General Juliane Kokott of the EU Court of Justice in Luxembourg said in a non-binding opinion today. The court follows this advice, at least in part, most of the time.
United Continental Holdings Inc., AMR Corp.’s American Airlines and the Air Transport Association of America challenged the EU’s first attempt to extend the world’s largest carbon cap- and-trade program beyond its borders. The EU regulator last month said it won’t ditch its plans to impose carbon curbs on flights to and from the region’s airports starting next year.
EU carbon permits for December rose as much as 2.7 percent to 10.60 euros on the ICE Futures Europe exchange in London, and were at 10.51 euros at 12:40 p.m.
At a court hearing in July, the airlines said the EU plans to extend the EU carbon market to all flights that depart from or arrive at an airport in the region are unlawful. The advice by Kokott, one of eight advocates general at the EU court, gives an indication of which way the tribunal may rule.
‘Very Good Indication’
EU Climate Commissioner Connie Hedegaard in an interview during a visit to New York last month said while the regulator doesn’t want to “dictate” to “the world what to do,” aviation can’t be excluded forever.
Hedegaard said today she is “glad” about the opinion and that the “EU reaffirms its wish to engage constructively with third countries during the implementation of this legislation.”
Kokott’s opinion in the case “is not shared in the international community,” said Tony Tyler, director general of the International Air Transport Association.
The opinion “is only part of a complex set of developments concerning the EU-ETS,” said Tyler, referring to the EU emissions trading scheme. “Many governments are rightly concerned about the infringements on sovereignty and the Chicago Convention that Europe’s plans pose.”
The so-called Chicago Convention is the Convention on International Civil Aviation.
The Air Transport Association said its view that the “extension of this unilateral, regional scheme to aviation violates international law is supported by more than 20 countries”, including Brazil, Russia, India, China, Japan and the U.S.
The EU decided in 2008 that aviation should become a part of its carbon cap-and-trade program.
A coalition of environment groups, including the Environmental Defense Fund, welcomed the court opinion and called it “an encouraging development.”
“The opinion thoroughly dismisses the airlines’ argument that the EU law violates sovereignty, pointing out that it is ‘by no means unusual for a state or an international organization also to take into account in the exercise of its sovereignty circumstances that occur or have occurred outside its territorial jurisdiction.’”
Emissions from international aviation account for 3 percent of global greenhouse gas discharges and that share is expected to rise, according to the EU. Scientists say pollution must be cut to keep the planet from overheating.
“Exempting the non-EU airlines will invariably put the EU airlines at a competitive disadvantage,” said Mehran Massih, a lawyer and London-based head of the environment department at law firm Shearman & Sterling LLP.
The Emissions Trading System, started in 2005, covers more than 11,000 utilities and manufacturers and is the cornerstone of the EU’s climate plan. The EU system is the region’s main tool to reach its target to reduce carbon dioxide by 20 percent in 2020 compared with 1990 levels.
The High Court in London referred the case to the EU court last year to clarify the legality of the emissions curbs.
The case is: C-366/10, The Air Transport Association of America, American Airlines, Inc., Continental Airlines, Inc., United Airlines, Inc. v. The Secretary of State for Energy and Climate Change.
–With assistance from Catherine Airlie in London and Ewa Krukowska in Brussels. Editors: Alessandro Vitelli, Anthony Aarons.
To contact the reporter on this story: Stephanie Bodoni in Luxembourg at firstname.lastname@example.org
To contact the editor responsible for this story: Anthony Aarons at email@example.com