Emissions Trading Earns Its Wings

• Author: Gabrielle Williamson
• Position: Managing Partner of the Brussels office of Heuking Kühn Lüer Wojtek, a German law firm
• Pages: 22-22

Page 22 ❧ THE ENVIRONMENTAL FORUM Copyright © 2011, Environmental Law Institute®, Washington, D.C. www.eli.org.

Reprinted by permission from The Environmental Forum®, Nov./Dec. 2011

An attempt to broaden

the EU greenhouse gas

reduction scheme run s

into some turbulence

Emissions Trading

Earns Its Wings

The European Trading System is

the largest market for greenhouse

gas allowances, covering approximately

11,000 power stations and plants in 30

countries. As experience was gained un-

der the cap-and-trade system, the Eu-

ropean Commission decided to extend

it. e measure, passed in 2009, covers

aircraft, currently accounting for three

percent of total GHG emissions and

likely to double by 2020. But the case

of air travel illustrates that regional sys-

tems are often not the best choice.

e ETS now covers aircraft tak-

ing o and landing at EU airports,

measuring the entire level of emissions

produced during the ight. At this

point, the unilateral approach literally

sees its limits. Air trac is, by its very

nature, a cross-border business. It is no

surprise that airlines registered in non-

EU States are challenging the initiative

before the European Court of Justice.

Airlines from EU Member States, while

not joining in the litigation, are equally

concerned about the new approach.

e litigation started with a claim

for judicial review before the High

Court of Justice of England and Wales

seeking the annulment of measures

implementing the new system in the

United Kingdom. e applicants were

the Air Transport Association of Amer-

ica and three U.S. airlines, American,

Continental, and United, who chose

the UK as their administering EU

Member State and, therefore, fall under

its jurisdiction. National courts within

the EU cannot rule on the validity of

EU legislation. us, the High Court

presented a request for preliminary rul-

ing to the ECJ.

e plaintis claim that the limits

are contrary to customary international

law because emissions outside EU air-

space are being factored into the calcu-

lation, which violates the sovereignty of

third states. In contrast, the defendant,

the UK, argues that the trading scheme

only sets up conditions under which an

aircraft may depart from a European

airport or arrive there.

e plaintis also questioned the

unilateral application of the ETS to

aircraft of non-EU States because the

Kyoto Protocol requires countries to

provide for the reduction of emissions

from aviation by a global sector-specic

approach in the framework of the Inter-

national Civil Aviation Organization.

e EU system, the defendant says, is

not unilateral since it takes potential

complementary trad-

ing systems into ac-

count to avoid double

charging.

Finally, the plain-

tis claim that ad-

ditional expenses for

emissions certicates

constitute an unlawful charge under the

Chicago Convention and the EU-U.S.

Open Skies Agreement, assuming that

both treaties limit and determine the

scope of EU provisions. e defendant

countered that the ETS is not a charge,

but a market-based mechanism which

does not necessarily generate costs and

is not linked to the right to transit or

enter EU territory.

In its judgment, the ECJ will have

to pronounce on the existence and the

scope of provisions of international cus-

tomary law opposed to jurisdiction and

extraterritorial regulation in the eld

of aviation. Another issue is the right

of private parties to challenge EU law

using principles of international law.

e ruling is not expected to be handed

down before next spring.

In the interim, the EU initiative is

facing strong opposition both in the

United States and China. In July, Rep-

resentative John Mica, Chairman of

the House Committee on Transporta-

tion and Infrastructure, introduced the

European Union Emissions Trading

Scheme Prohibition Act of 2011. is

legislation is meant to exempt U.S.

aircraft from the EU system, directing

the Secretary of Transportation to pro-

hibit U.S. airlines from participating.

According to the sponsors, the bill sig-

nals to the EU that its system violates

international law and U.S. companies

are not going to be party to it. It also

attempts to create more time for the

ICAO process to work.

e Chinese Government, in

contrast, responded with economic

threats, announcing a freeze on an

order for 10 Airbus A380 jets. “Trade

war” is an often used notion in this

context. However, there is much sa-

ber rattling. U.S. politicians say that

the EU approach puts U.S. airlines

at a competitive disadvantage. is

assumption is disput-

able, given that the

new system applies to

all aircraft, regardless

of nationality. e

nal consequence of

being subject to an

operating ban within

the EU in case of non-compliance

with the trading system may be more

harmful.

With its unilateral approach, the

EU also responds to a longtime stall

in attempts to achieve a binding

global emissions trading system. A

possible venue for reaching a global

solution on carbon trading initiatives

in the air trac industry may be the

World Trade Organization. In this re-

spect, the concept of emissions trad-

ing seems to be caught in a dilemma

between regional restraint and more

time spent at the global negotiating

table.

By Gabrielle Williamson

A V   EU

Gabrielle H. Williamson is Managing Par t-

ner of the Brussel s ofce of Heuking Küh n

Lüer Wojtek, a Ger man law rm. She also

practices in t he rm’s Düsseldorf of ce. She

can be reached a t g.williamson@heuking.de.