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EU court upholds carbon trade plan

December 23, 2011, 11:17 am

The European Court of Justice in Luxembourg recently upheld a carbon trade plan for aviation that would charge airlines flying to Europe for their carbon pollution. The goal of the measure is to curb climate-changing emissions from international travel and aviation.

Officials from aviation groups and various countries argued with the court's decision, saying the cap-and-trade program infringes on national sovereignty or violates pre-existing international aviation treaties, The Associated Press reported. U.S. and Canadian airlines, represented by an industry trade organization, Airlines for America, presented the arguments to the court and were supported by China, India and other countries with international airlines.

In response to the arguments, the EU court said the charges would enable more efficient airlines to make money through energy-efficient innovations spurred by the plan. The plan was enacted after the International Civil Aviation Organization failed to make any efforts to reduce carbon emissions despite promising to reduce airline pollution in a resolution authorized 14 years ago, the source reported.

"Today's court decision further isolates the EU from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change," said Airlines for America.

The source reported the measure will give each airline pollution permits that are less than its historical emissions averages. If an airline exceeds its allocated limit, it will be able to buy permits from other airlines that have emitted less than they are allowed and have remaining cap space. Emissions are counted for the entire flight of a plane that enters a European airfield.

The court hopes the measure will encourage airlines to upgrade their planes and technology to reduce emissions and improve efficiency. All revenue derived from the added charges will be dedicated towards efforts to fight climate change throughout the European Union, the source reported.

The 13 judges on the court said the EU was able to pass the measure legally as commercial airlines that choose to operate at European airports fall under EU jurisdiction. Further, the court rejected an appeal that claimed the EU's plan would be in conflict with the Open Skies treaty prohibition against unilateral taxation or discriminatory treatment. The court said the measure is not a tax, but is subject to an open market from which an airline stands to profit. All flights entering Europe will be treated equally under the measure, thus no discrimination is occurring, the source reported.

According to the Washington Post, Fitch Ratings said the court's decision could worsen the dispute between the EU and the trade organization Airlines for America, several U.S. airlines, and other international carriers. Airlines could fight back against the measure with slot allocations at airports or authorizing routes, particularly in developing countries.

"We believe threats of trade retaliation over the EU's cap-and-trade system will pose growing threats to aviation market access in both developed and emerging markets next year," said Fitch.

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