European airlines nervous as international demands for Europe to exclude foreign airlines from EU ETS continue to grow

European airlines nervous as international demands for Europe to exclude foreign airlines from EU ETS continue to grow | H.R.2594,ECJ

Fri 19 Aug 2011 – Trade associations representing Europe’s leading network and regional carriers have called on the European Commission to urgently address the growing international pressure, particularly from the United States, for the EU Emissions Trading Scheme (EU ETS) to drop the inclusion of airlines from outside Europe. The Association of European Airlines (AEA) said that with just five months before the start there was now considerable uncertainty on the scheme’s future. In the face of a threatened international withdrawal, the European Regions Airline Association (ERA) said the scheme must apply to all airlines, regardless of origin, or none. Following the introduction of the proposed legislative Bill in the US House of Representatives forbidding US airlines to participate, a hearing of the House Aviation Subcommittee took place on July 27. China and Russia are also understood to be discussing countermeasures of their own.


According to the AEA, the US draft legislation is the clearest indication to date of the strength of foreign opposition to the EU ETS and the association has met for urgent talks with European Commission officials.


“The scheme has a number of flaws,” said AEA Secretary General Ulrich Schulte-Strathaus. “But this proposed Bill, prohibiting US carriers from complying, is not the answer. If adopted, it will only increase the tensions between the EU and the US as EU member states are bound by the ETS Directive to ensure compliance.


“With the ETS clock ticking very loudly now, we have once again urged the Commission to address the issues being raised by Europe’s major trade partners. Our position is clear: European carriers must not be caught in the political crossfire.”


The ERA has written to Commission Vice-President Siim Kallas urging either the complete withdrawal or the suspension of the implementation of the EU ETS for all carriers “until existing disputes can be reconciled or until ICAO has had time to develop a climate protection scheme that could be applied worldwide.”


The ERA’s Director General, Mike Ambrose, said: “In pressing ahead with the EU ETS as a unilateral solution, the Commission has brought the current situation on itself. We are now seeking reassurance from Vice-President Kallas that should the US Bill – and any similar actions from other countries – be accepted by the Commission, the application of the EU ETS to all carriers, including intra-EU airlines, should be withdrawn or suspended.”


The EU Directive provides for exemption from the EU ETS for airlines from countries that apply “equivalent measures” to reduce aviation emissions. However, there is no clear definition of what constitutes equivalency and EU airlines are concerned that the Commission, in the face of international pressure, could accept weak proposals from some high-profile countries seeking an opt-out.


In its letter to the Commission, the ERA sought reassurance that “transparent, consistent and robust methodologies ... that are genuine in terms of the scope, magnitude and timescales of climate change protection measures” are applied to determine equivalency from non-EU countries in order to gain exemption.


“A situation whereby intra-EU carriers would be the only airlines left complying with the scheme would do nothing for the environment but would be detrimental to Europe’s economic stability, its business and citizens, particularly those in the EU’s regions,” added Ambrose.


The Association of Asia Pacific Airlines (AAPA) has also called for a rethink on the scheme and accuses the EU of triggering the international backlash by over-reaching its authority.


On the issue of equivalency, AAPA said the EU had given no indications as to how it should be determined or what processes might be involved.


“This would only bring added complexity to the scheme without being environmentally effective,” said AAPA Director General Andrew Herdman. “In any case, the whole notion of partial exemptions is practically unworkable, given such exemptions would only exclude inbound flights to the EU from the relevant countries, but would have to be applied equally to all carriers operating on such routes.


“There is a certain irony in the fact that the EU insists that any such equivalent measures would need to be acceptable to the EU. On the other hand, the EU has always insisted that other governments are not even entitled to express an opinion on the acceptability of the terms of the EU ETS.”


Added Herdman: “Foreign governments have long held the view that the inclusion of foreign airlines in the EU ETS, without their consent, breaches international treaty obligations and bilateral agreements governing international aviation. More than 140 non-EU governments stated their unequivocal opposition to the unilateral imposition of the EU ETS at the two most recent triennial Assembly meetings of ICAO in 2007 and 2010.”


He called on the EU to urgently re-engage with the international community to find solutions and avoid further escalation of the dispute, with ICAO being the appropriate forum.


Meanwhile, Aviation Week magazine reports that China and Russia are looking into the possibility of bringing a joint formal complaint at ICAO under the Article 84 procedure against EU states over the inclusion of their airlines into the ETS, and were seeking support from other contracting states. A Chinese official contacted by GreenAir Online would not confirm the accuracy of the report but said a joint Sino-Russian statement on “countermeasures” would be issued “in the near future”. He added that the China Air Transport Association (CATA) was still considering legal proceedings against the EU but this was a matter for CATA alone.


Article 84 proceedings are extremely rare with just a handful of disputes actioned since the inception of the Chicago Convention in 1944. The last complaint was filed in March 2000 by the United States over noise regulations imposed by the EU on hush-kitted aircraft. According to Canadian-based aviation consultant Chris Lyle, who was involved with the case at ICAO, the matter was resolved after numerous high-level US-EC consultations and meetings resulted in an EU counter-compromise and the eventual withdrawal by the US of the complaint in late 2001.


“The Article 84 process is very convoluted and can take years,” said Lyle. “My best guess would be that Article 84 will be used as a political tool to achieve an outcome in the form of a Resolution at the next ICAO Assembly in 2013 – unless there was an Extraordinary Session called earlier.”


As the inclusion of international aviation into the EU ETS has been in development for three years and has been the subject of much heated debate and opposition at ICAO, it leads to the question as to why the complaints procedure has not been initiated sooner.


“I think the main reason is that states were not aware of the full implications and, if they were, didn’t believe the scheme would actually come to pass,” said Lyle. “Also, they would have to wait formally until the final legislation was in place.”


Speaking on a personal basis, former US State Department official John Byerly, who was responsible for negotiating international bilateral air services agreements on behalf of the US, added: “The US government – and, I think, many other governments – had hoped a solution could be hammered out at the ICAO Assembly last October. It would have been premature – and counterproductive to the effort to find consensus at the Assembly – to have brought an Article 84 proceeding in ICAO beforehand or to have considered formal dispute resolution or arbitration under the EU-US air transport agreement.”


Byerly agrees that formal dispute resolution can be a long, drawn-out process. “Although the United States has brought arbitration proceedings in a few unique air services disputes in the past – including one against France in the 1970s and another against the UK in the early 1980s – the much more common approach to serious disputes is to employ countermeasures,” he told GreenAir Online. “For example, when the US was unable through consultations to resolve a dispute with Argentina over discriminatory airport charges, the Department of Transportation, after an administrative law proceeding, imposed a requirement on Aerolineas Argentinas to deposit funds in an escrow account to make up for the difference in the fees being charged.”


In Washington, the July 27 hearing of the Aviation Subcommittee of the House of Representatives featured a full discussion of the bipartisan H.R. 2594 Bill (see story) proposed last month that prohibits US airlines from participating in the EU ETS.


According to Nancy Young, Air Transport Association (ATA) Vice President Environmental Affairs, “In addition to the representatives of industry and the Administration who testified, every Member of Congress participating in the hearing, from both major political parties, expressed opposition to the application of the EU ETS to US airlines and aircraft operators.”


Although some believe the Bill has little chance of making its passage through Congress, Young said it was too early to forecast its prospects.


She refuted suggestions that the introduction of the Bill signalled a lack of confidence in the outcome of legal proceedings the ATA and several leading US airlines have brought against the EU ETS inclusion that is currently before the European Court of Justice (ECJ).


“What the [H.R. 2594] legislation says is that it isn’t only the US airlines and aircraft operators who are opposed to the unilateral EU ETS, but the federal government is as well. It says nothing with respect to our litigation,” she said.


“With specific respect to our litigation, we are confident that ATA is correct on the law and should prevail on its merits. We are glad to see that various governments who have long stated their opposition to the EU’s unilateral application of the ETS to international aviation are now preparing to take real action.”


Young believes the Article 84 matter also raised the issue of where the EU’s authority with respect to international aviation begins and ends, and how that related to the authority and responsibilities of individual EU member states.


“In our legal case before the ECJ, the EU has asserted that it is not itself a party to the Chicago Convention, so it is doing nothing wrong if it violates the Convention,” she said. “Yet a good argument can be made that the EU should be bound because it is stepping into the shoes of the EU states, all of whom are signatories to the Convention. As these states were signatories before the EU was created, the ‘economic union’ they created should likewise be bound.


“Further, the EU has assumed competence on behalf of its member states to negotiate bilateral air services agreements with other countries and has denied those states the ability to do so. Yet the agreements are necessarily underpinned by the Convention. Further, the EU has adopted legislation which, when implemented by its member states, puts them in violation of the Convention.”


Young’s argument is supported in a Washington Times article last week written by the Republican member of the US House of Representatives, Jim Sensenbrenner. “The implications here are staggering,” he said. “European countries are asking a European court to sanction their ability to pick and chose their international obligations. Under this logic, individual countries in the EU can sign treaties and benefit from their protections, but can then hide behind the EU to avoid their obligations.”


He attributed “legal experts” in stating that the EU courts were “highly unlikely” to overturn an EU law. “As EU courts are not expected to uphold international law, it will be up to Congress and the administration to protect US carriers and passengers from illegal taxation,” said the controversial congressman, who described the EU ETS as a “cap-and-tax” EU money-grab.


Sensenbrenner believes the H.R. 2594 legislation was only a “blunt fix”. “If passed, airlines would face conflicting legal obligations,” he said. “EU law would require airlines to pay fees, but US law would bar them from paying them – forcing a standoff. Only the administration has the ability to negotiate a diplomatic solution.


“The Obama administration opposes the EU’s new tax, but with the January 1st deadline looming, it must work quickly before the illegal fees take place.”








Aviation Week Article 84 article

European Union Emissions Trading Scheme Prohibition Act of 2011 (H.R. 2594) (pdf)

Washington Times’ Sensenbrenner article




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