A European Union scheme compelling all airlines to pay for carbon emissions on flights to and from the 27-nation bloc from next January is legal, the EU’s highest court said in a preliminary opinion Thursday.
The rebuff to a legal challenge by U.S. airlines, which sought to exclude non-EU carriers from the carbon cap-and-trade scheme, has fanned fears of a broader trade conflict as the world’s leading aviation nations vehemently oppose the EU’s unilateral move.
“EU legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law, and is compatible with relevant international agreements,” Juliane Kokott, an Advocate General of the European Court of Justice, said in her opinion.
While the opinion is not binding, the Luxembourg-based Court usually follows the Advocate General’s guidance and judges are expected to support Kokott in a final ruling expected early in 2012.
Currently airlines, all-cargo carriers and integrators are excluded from the EU’s Emissions Trading Scheme [ETS], which started in 2005 and covers thousands of utilities and manufacturers who pay levies if they exceed set carbon emission limits.
From January, all airlines will be required to obtain permits covering carbon emissions from aircraft on routes either originating or terminating in the EU. Initially airlines would only have to pay for 15 percent of the carbon they emit and would receive free allowances to cover the other 85 percent.
United Continental Holdings, American Airlines and the Air Transport Association of America challenged the EU’s expansion of its carbon scheme beyond its borders in the London High Court after the UK adopted the EU directive. The London Court referred the case to the European Court for clarification.
The Air Transport Association of America rejected the Advocate General’s opinion. “ATA’s view that the extension of this unilateral, regional scheme to aviation violates international law is supported by more than twenty countries,” including Brazil, Russia, India, China and Japan, the group said in a statement.
Cargo airlines have been prominent in their opposition to the EU scheme claiming it will increase the cost of trade. The International Air Cargo Association urged the EU to suspend the extension of the ETS to aviation and pursue a global agreement through the International Civil Aviation Organization.
Frank Appel, CEO of Deutsche Post DHL, which operates nearly 150 aircraft, said EU airlines would want the carbon scheme amended if U.S. carriers won their case as they would be at a competitive advantage to non-EU rivals.
“The timing of the ETS’s introduction into aviation next January is especially problematic for European and U.S. carriers already facing a more difficult 2012 operating outlook as a result of the global economic slowdown, high jet fuel prices and persistent overcapacity in high-fare transatlantic markets,” ratings agency Fitch said.
-- Contact Bruce Barnard at email@example.com.