August 19, 2022

U.S. Airlines Challenge European Emissions Rule

BRUSSELS — When the European Union’s highest court hears arguments Tuesday that Europe should not charge U.S. airlines for their carbon emissions, it will be a showdown at the crossroads of environmental protection and cold cash.

Starting Jan. 1, the Union intends to expand its Emissions Trading System to cover emissions from most flights that touch down at, or take off from, European airports. That means airlines will have to buy some of their carbon permits from traders and E.U. governments.

Promoters of the change say the rules, which were approved by the 27-nation bloc in 2008, should compel airline operators to speed up adoption of greener technologies at a time when air traffic, which contributes about 3 percent of global carbon dioxide emissions, is growing much faster than efficiency gains are cutting those emissions. Many European governments say they will use the extra income to help offset spending on climate protection.

But the plan has generated fierce opposition from airlines, many of them non-European. They say that Europe has no right to charge for emissions on some routes that are mostly outside European airspace.

Air China, China Eastern and China Southern have threatened to file a lawsuit against the system, and the China Air Transport Association has suggested that Chinese airlines might buy fewer aircraft from European manufacturers. In response, Airbus and the Association of European Airlines have raised concerns about a trade conflict with China that could affect their businesses.

On Tuesday, the Air Transport Association of America, an industry group, and three major U.S. airlines — United Airlines and Continental Airlines, which merged last year, and American Airlines — will make their case at the European Court of Justice in Luxembourg against the way the system will be applied by Britain.

As home to London Heathrow and other busy airports, Britain has the highest carbon dioxide emissions from aviation in the Union, making it a cornerstone of the E.U. system to regulate the sector.

A decision by the court supporting the U.S. airlines would badly damage the initiative because E.U. regulators and European airlines say that involvement of non-E.U. carriers is critical to its success. An advisory opinion could come within months, with a final judgment possible before the system takes effect in 2012.

Lawyers for the U.S. carriers are expected to argue Tuesday that the E.U. system conflicts with the Chicago Convention, an international accord that gives countries sovereignty over their airspace, and with the Kyoto Protocol, a climate treaty.

The airlines also are expected to attack the cost of the system and the lack of guarantees that revenues will be used for climate protection.

Seeking to defuse the dispute, E.U. officials have emphasized that they will exempt incoming flights if other countries take “serious measures” to reduce emissions that would be considered equivalent by the Union. E.U. officials also have begun discussions with national governments on introducing rules requiring them to use the revenues from permits to tackle climate change.

But they say delays are out of the question.

“We are not thinking at all about the possibility of changing our legislation,” José Manuel Barroso, president of the European Commission, said last month. “All the world should unite in some kind of directive like this one.”

What is clear is that by charging airlines for their carbon emissions, the European Union would do more than protect the climate. The system could be a source of revenue for countries, like Britain, with busy airports and ballooning budget deficits.

Britain already generates about £500 million, or $800 million, annually from auctioning permits to polluting industries under the Emissions Trading System, according to the Office for Budget Responsibility, a government-funded body that operates independently.

It could generate a further £80 million next year from airlines, while nations across the Union could net about €480 million, or $695 million, according to estimates by bankers and analysts.

Airlines complain that some of the money they will spend on carbon permits will end up subsidizing debt-laden governments.

“Countries like Britain have reserved the right to use the money how they see fit,” said Nancy Young, a vice president at the Air Transport Association of America. “Helping Europeans out of their fiscal hole is not the aviation industry’s job.”

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