Court Upholds Cap-and-Trade Program for Airlines, but Ruling May Be Up in the Air

The European Court of Justice on Wednesday upheld a cap-and-trade program designed to curb climate-changing emissions on international flights, a ruling that many nations outside of Europe have fought to block.

An American Airlines Boeing 777 seen on approach to London's Heathrow Int'l Airport. flickr/Mark Winterbourne Photography.

The plan would charge airlines for their emissions of global warming gases. The U.S., China and other countries are steadfastly opposed to having their airlines subjected to Europe's Emissions Trading System, which allows companies that emit carbon dioxide to buy and sell a limited amount of permits. The new regulations would force non-European airlines to pay when flying to or from European airports and could raise ticket prices, despite the absence of such regulations in the country where such airlines are based.

As the New York Times reports today, the regulations are creating severe turbulence between U.S. airlines and the European Union. In fact, the path forward for the regulations are so fraught with peril that they may never go into effect in their current form, despite what the court ruled yesterday. According to the Times:

  • The goal, European officials have said, is to speed up the adoption of greener technologies at a time when air traffic, which represents about 3 percent of global carbon dioxide emissions, is growing much faster than gains in efficiency.
  • Governments and airlines have been in negotiations for more than a decade over the creation of global cap-and-trade system under the auspices of the International Civil Aviation Organization, an arm of the United Nations. The I.C.A.O.’s 190 member states passed a resolution in 2010 committing the group to devising a market-based solution, though without a fixed timetable.
  • Impatient with the pace of the I.C.A.O. talks, the European Commission moved ahead with its own plan, which was passed two years ago with the backing of national governments and the European Parliament.
  • At an I.C.A.O. meeting last month, 26 member states, including China, Russia and the United States, formally signaled their dissatisfaction with the European system — a sign that they could push for a formal dispute procedure at the organization.
  • European officials have said repeatedly they would prefer a multi-lateral solution and are prepared to amend their cap-and-trade system if and when the I.C.A.O. reaches a global aviation emissions agreement.

Interestingly, the rules don't kick in when an aircraft enters European airspace. Instead, airlines will be charged based on the entire journey, from gate to gate, either traveling to or from an E.U. member airport. This is particularly irritating for U.S. airlines since most European flights spend the majority of their time in U.S., Canadian and international airspace before descending to their European destination. However, once emitted, greenhouse gases don't respect arbitrary airspace boundaries.

The Times article cites airline industry figures showing that less than 9 percent of the emissions from a typical San Francisco to London flight actually take place in E.U. airspace.

The State and Transportation Departments are involved in negotiations with European nations to try to resolve differences over the emissions rules. A Dec. 16 letter from Secretary of State Hillary Clinton and Transportation Secretary Ray LaHood warned the E.U. that the U.S. might retaliate via trade measures.

It's not just the U.S. that is objecting to the rules, either. China is strongly opposed as well, and has threatened to retaliate by withholding purchases of Airbus aircraft, which are made in Europe. The Chinese government may argue that the rules violate the Kyoto Protocol, which did not set any binding emissions limits on China. As the Times reports:

  • Experts say the Chinese could argue that the European law violates the Kyoto climate agreement by requiring airlines from developing nations, which are exempt from emissions cuts under the treaty, to bear the same burdens as carriers from wealthier nations.