December 5, 2023

Green Column: European Pollution Regulations Face Challenge

So does that give the European Union the right to regulate the emissions from airlines and shippers using its ports and airports?

The answer may partly rest on a lawsuit brought by the industry group Air Transport Association of America and by three major airlines — United and Continental, which merged last year, and American.

The airlines filed their case in late 2009, at the High Court in London against the extension of the E.U. Emissions Trading System to most international flights landing in and taking off from European airports.

The British court then referred the case nearly a year ago to the European Court of Justice in Luxembourg for a preliminary ruling.

Any verdict in favor of the airlines, which claim that the move by the E.U. breaches international conventions and laws, has the potential to undermine the initiative because E.U. regulators and European airlines say participation by foreign carriers is critical.

The U.S. airlines still are waiting for a hearing date. Even so, a verdict could come before the end of this year — and before the regulation takes effect, on Jan. 1, 2012.

Air China, China Southern and China Eastern have also threatened to file a lawsuit against the system, according to a report on Chinese state television.

In an emission trading system, the authorities set limits on greenhouse gases and then allow companies to buy and sell permits corresponding to their emissions. Advocates say such systems are the cheapest and most effective ways to control the gases in advanced economies and the best way to encourage innovative technologies, like cleaner engines and alternative fuels.

The European system already applies to about 11,000 power plants and factories. But the system has had a rocky ride since trading began six years ago, including extreme volatility, tax fraud, the recycling of used credits and suspicions of profiteering. The European Commission, the E.U. executive, had to shut down part of the system in January after a series of online attacks resulting in the theft of permits worth millions of euros. Since then, more security measures have been introduced.

A more fundamental problem for the E.U. system is that other parts of the world are adopting formal limits on greenhouse gases far more slowly than Europe would like.

That has prompted European companies to complain about stiffer international competition from foreign-based manufacturers that face fewer environmental constraints. That has also increased the pressure on the Union to find ways to share the burden of cutting emissions more widely, by making other significant polluters like airlines and shippers participate.

But according to Brian Havel, the director of the International Aviation Law Institute at DePaul University in Chicago, “the E.U. regulation is an overreach” that “could set a troubling precedent where other states could begin imposing new taxes and charges on foreign airlines for activities which occur beyond their airspace.”

Mr. Havel said the verdict still could go in favor of the Union because the court “has been quite supportive of E.U. initiatives that impose economic costs on the airlines and are pro-consumer.”

The European Commission declined to comment directly on the case.

But it has said the policy is justified on environmental grounds, and there is enough flexibility in the legislation so that foreign airlines could be exempted, at least in part, if countries where those airlines are based take additional measures to reduce greenhouse gases.

Within Europe, the airlines that could be affected the most are low-cost carriers, according to a report last month by the rating agency Standard Poor’s.

Standard Poor’s said airlines like British Airways and Lufthansa that charge premium fares should find it easier than the low-cost carriers, where price is a more sensitive factor, to pass on extra costs onto passengers in the form of slightly higher ticket prices.

The rating agency also said that airlines flying short-haul routes are less fuel-efficient than long-haul carriers because of more frequent takeoffs, when a large amount of fuel is burned, generating more emissions and demand for permits.

The European Low Fares Airline Association, which represents low-cost airlines like Ryanair and Easyjet, has been among the groups pressing hardest for the system to apply to international carriers. John Hanlon, the association’s secretary general, said that 80 percent of emissions from aviation in the Union were generated by long-distance flights, and so not including them would render the law environmentally ineffective.

In some respects, international shipping raises even more vexing questions for regulators contemplating emissions trading. Ship owners could easily swap the nationalities of their vessels, potentially making it complicated to keep track of some ships, like chartered vessels, that have used E.U. ports. Shippers also could make the process of determining how much to charge more challenging by using polluting vessels to deposit cargoes just outside E.U. waters and then using much cleaner vessels or alternative modes of transport to make the journey into the Union.

Another issue bedeviling shipping regulation is that developing countries like Liberia and Panama, where many vessels are registered, oppose some of the measures that would raise costs on what they regard as an important industry.

Even so, the European Commission reiterated last month a longstanding threat to impose rules unilaterally if shippers and the International Maritime Organization, a U.N. agency, failed to strike an international deal on reducing the industry’s carbon footprint this year.

But the E.U. transport commissioner, Siim Kallas, also suggested that the commission could extend that deadline beyond 2011 if there were real signs of progress in related areas, like ship design.

“Right now, it looks like the E.U. hasn’t got the stomach for a war on two fronts,” said Bill Hemmings, a specialist in aviation and shipping at the environmental group Transport Environment in Brussels. “It wants to get its system for airlines to buy CO2 permits off the ground before it gets its hands dirty with shipping.”

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