Country Watch
lowances per year. If a company reduces its emis- sions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances or take measures to re- duce their emissions by investing in more efficient technologies.
From January 1, 2012, aviation has been included in the ETS. Accordingly, all airlines will have to ac- quire and surrender emissions gas allowances for their flights which depart from and arrive at Euro- pean airports. After each year, operators must sur- render a number of allowances equal to their actual emissions in that year, otherwise heavy fines are imposed. In the case of persistent offences, the EU has the right to ban airlines from its airports.
Aviation is one of the fastest-growing sources of greenhouse gas emissions, rising 3 to 4 percent per year. Aviation emissions are currently exclud- ed from the 1997 Kyoto Protocol even though the contracting Parties have always agreed that they should be limited. Since the international commu- nity has not been able to reach a global measure to reduce emissions within the International Civil Aviation Organization (ICAO), the EU decided to move forward unilaterally with the EU ETS.
The EU ETS has met with fierce opposition from airlines. Three United States headquartered air- lines (American, Continental, and United Airlines) and the Air Transport Association of America (ATA) took legal action against the EU legislation by chal- lenging the legality of the aviation emission trading system, as applied to non-EU airlines. In particu- lar, they argue that the EU measures violate the Kyoto Protocol which provides that parties should regulate greenhouse gas emissions from interna- tional aviation through ICAO, the Chicago Conven- tion, the EU/US Open Skies Agreement, as well as principles of customary law, as the sovereignty of States over their airspace and freedom to fly over the high seas.
Twenty-six countries including China, Russia, India and the United States have adopted a declaration
describing the EU’s unilateral legislation as an at- tack to other’s countries sovereignty. Imposing a form of tax on fuel consumption and seeking to apply the allowances trading scheme beyond the European Union’s territorial jurisdiction would re- sult in the application of an extra-territorial prin- ciple.
Despite criticism and growing opposition, mem- ber states and the European Parliament remain on their stance. The ECJ has stated that the EU system “infringes neither the principle of territori- ality nor the sovereignty of third states, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the member states of the EU and are thus sub- ject to the unlimited jurisdiction of the EU. Nor the application of the law affects the principle to fly over the high seas since an aircraft flying over the high seas is not subjected to the emission trading scheme.” The ECJ takes the view that compared to alternatives such as a fuel tax; bringing aviation in the EU ETS will provide the same environmen- tal benefit at a lower cost to the overall society, encouraging airlines to invest in more efficient technologies to reduce their emissions. Imposing a burden only to European airlines would result in the distortion of competition.
Observers express concerns about retaliation and the risk of a war with a form of tit-for-tat taxes and restrictions on traffic rights for European carriers. The aviation industry is concerned the decision could spark trade conflicts with the United States and China. The EU has already received backlash last June, when China blocked a $3.8 billion USD purchase from Airbus, a European aircraft manu- facturer, to protest the EU aviation system.
On October 24, the U.S. House of Representa- tives passed a bill making it illegal for U.S. airlines to comply with the controversial EU law. If the bill becomes law, U.S.-based airlines will be put in a difficult legal position when aircraft fly to and from Europe due to concerns of non-compliance with
ILSA Quarterly » volume 20 » issue 3 » February 2012
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