Bloomberg News

Airlines May Lose Battle Over EU’s Carbon Caps at Top Court

October 06, 2011

(Updates with comment from U.S., British Airways from 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 3.6 percent to 10.60 euros on the ICE Futures Europe exchange in London, and were at 10.46 euros at 4:35 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.”

The U.S. government said it has “strong objections” to the European Union’s inclusion of aviation in its emissions- trading system. “We maintain our strong legal and policy objections to the inclusion of flights by non-EU carriers in the EU-ETS,” Deputy Assistant Secretary of State for Transportation Affairs Krishna R. Urs said in a statement today.

Kokott’s opinion in the case “is not shared in the international community,” Tony Tyler, director general of the International Air Transport Association, said in an e-mail. It’s “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.”

Chicago Convention

The so-called Chicago Convention is the Convention on International Civil Aviation.

The EU decided in 2008 that aviation should become a part of its carbon cap-and-trade program.

British Airways, a unit of International Consolidated Airlines Group SA, said that while supporting emissions trading, it was concerned about the uncertainty created by the continuing and vociferous legal and political challenges by countries and airlines outside the EU.

“The continuing uncertainty risks turning the scheme into an international trade dispute rather than an environmental solution to the issue of carbon emissions,” Sophia Aantoniades, a spokeswoman for the airline, said by e-mail.

‘Encouraging Development’

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,” a statement from the coalition said. “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.

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, Randall Hackley.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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