AVIATION:

U.S.-E.U. showdown over airline emissions begins today

If European lawmakers have their way, by next year any American flying from Boston to Paris will have to pay for the plane's carbon emissions over Massachusetts, Nova Scotia, the Atlantic Ocean and France.

A case before the highest court in the European Union to decide the matter starts today. At stake is this question: Can Europe's climate policy reach the tailpipes of planes flying to and from the continent, even when that plane is over other parts of the world?

Europe believes that under its cap-and-trade policy, the Emissions Trading System or ETS, the answer is yes. To U.S. airline operators and those in many other countries, the answer is no. American, United and Continental airlines, along with the Air Transport Association of America, filed legal action in the United Kingdom in 2009.

Arguments in the case begin today before the European Court of Justice. Observers expect judges to issue a ruling by winter.

Airlines are not currently covered under the European scheme. But the policy says that airlines landing or taking off in Europe will join the ETS on Jan. 1, 2012.

They will get 85 percent of their emissions certificates for free and buy the rest at auction. Airlines would become the second-largest sector in the system, after power plants.

The sector's carbon dioxide emissions will be capped at 97 percent of their average 2004-2006 levels in 2012 and 95 percent from 2013. Airlines that do not use all their allowances can sell the excess, while those that are short will have to buy more. This includes U.S. carriers such as the plaintiffs, and even the U.S. Navy.

U.S. claims plan violates international law

In the court case, ATA and the U.S. airlines will argue that Europe's trading scheme violates international law.

The Convention on International Civil Aviation or "Chicago Convention," states that countries have authority over airlines in their own airspace. Therefore, the ETS can't regulate flights to and from Europe when they're not over Europe, the U.S. airlines argue.

The American plaintiffs will also dispute whether Europe can, under the Chicago Convention, regulate U.S. airlines as they fly over the high seas, or if Europe can levy charges on other country's airlines.

"Our position is that the E.U. ETS as applied to U.S. airlines is contrary to international law and bad policy," Nancy Young, ATA's vice president for environmental affairs, said in an email. "Because it is contrary to law, it should be withdrawn."

European officials have disagreed forcefully.

"This is already adopted legislation and we are not backing down," said Isaac Valero-Ladron, spokesman for the European Commission, the E.U.'s executive body. "We knew what we were doing in 2008 when we adopted this and we are not changing our legislation."

"We can't impose a burden only to European airlines and not include others," he said. "It would be distortion of competition."

U.S. could be off the hook with 'equivalent' measures

European officials say there is leniency in the ETS. If another country can show "equivalent measures" on CO2 reduction from its airlines, then these airlines don't have to pay the carbon charge for one leg of their European roundtrip.

The topic came up last month when U.S. and European officials met in Oslo to discuss their bilateral aviation treaty. There, an unnamed U.S. official told Reuters, "The demand we made is that the E.U. ETS should not apply to U.S. carriers. We did not talk about how that might be done."

"The equivalent measures were discussed in Oslo," Valero-Ladron said. "The spirit of the idea is to leave it to the U.S. to come up with their own measures they are comfortable with and we will study and analyze if they are equivalent or not. I understand that the U.S. has no intention whatsoever to table any equivalent measures, but you should ask them."

The State Department, which was at the Oslo talks, did not respond for comment by press time.

The ATA's Young said U.S. airlines will not attempt to show equivalent measures. She said the European Union doesn't have an objective way to measure "equivalence" anyhow.

China is also objecting to the ETS, but it may have an escape hatch.

In recent months, it has threatened punitive action against European aviation, including not buying Airbus jets, if its airlines are included in the ETS. The European Union said last month it was examining the emissions-cutting measures China had proposed to see if they qualified Chinese airlines for exemption from the ETS (ClimateWire, May 31).

Meanwhile, Airbus sold 88 A320-series jets to Chinese jet leasing companies on June 28 and is in talks to sell a number of jets to Air China. Airbus also said last week it would boost production of rudders for the A320 jet at its Chinese joint venture.

'A lot of bluster'

If the United States doesn't win at the European Court of Justice, it will have other options.

Congress can write a "Sense of the Congress" statement into its aviation funding bill claiming that the ETS is illegal under international law. The statement can ask the President to make sure the ETS is not applied to U.S. airlines.

The United States could also pursue the matter in a dispute-settlement body under the Chicago Convention. Or it could use the U.S.-E.U. bilateral aviation agreement, according to Annie Petsonk, international counsel at the Environmental Defense Fund.

"But I think that would be a pretty big diplomatic decision for the United States to take," Petsonk said, noting that countries usually try to resolve such conflicts through talks rather than legal action.

EDF will be arguing in the ECJ case alongside the U.K. government and against the U.S. airlines.

Jake Schmidt, international climate policy director for the Natural Resources Defense Council, said he suspected the sides are talking tougher than they intend to play.

"I'm speculating, but I think there's a lot of bluster about this on all sides," he said.

Can it even be done?

Schmidt said under the ETS, a New York to London roundtrip ticket would cost $15 to $57 more, according to European Commission analysis. That's a rounding error in a total ticket that runs $900 to $1400, he said: "I find it shocking to say this is going to destroy the airlines."

Nevertheless, some in the aviation business said cutting 3 percent of emissions by 2013 will be challenging, since it's really just one-and-a-half years away.

Chris Villiers, an environment spokesman for Boeing, said planes are designed for 20- to 40-year production runs. Every couple years, "we make small changes that get you to 3 to 4 percent fuel efficiency improvements," he said.

"To get those massive 15-to-20-percent gains tends to require a new engine, wing, tail, fuselage, a whole new design," he said.

Villiers said the best prospect for cutting aviation emissions, though, is biofuel: It could cut aviation emissions up to 50 percent. But these fuels won't be ready by 2013; they're being made in small batches so far, and they must survive a lengthy testing process before they can be used commercially.

Ed Smith, a vice president for international and environmental affairs at the General Aviation Manufacturers' Association, is also worried about how his members will comply with the European policy.

GAMA's members build business jets and smaller planes; Smith said the ETS gives them no path to exemption.

ATA pushes for voluntary measures

So if the law is upheld in Europe, they will have to find ways to make their existing jets more efficient. It might mean flying with less fuel, which means taking more time to refuel after landing. It might mean asking its well-heeled passengers to bring smaller, lighter suitcases. It might even mean carrying two fewer cases of Coke than usual; every pound helps.

"This isn't going to get you nirvana," he said of these individual measures. "This is going to get you one-quarter of a percent, and if you add it all up, you might get another 1 percent or something."

Air travel is responsible for approximately 2 to 3 percent of greenhouse gas emissions currently, and CO2 output is expected to increase as the industry grows.

Consultancy Point Carbon estimates airlines will face a total €1 billion per year in costs associated with the ETS. The Association of European Airlines says the costs will be five times as high.

The ATA and others in the aviation business claim they have a better way to deal with the climate problem: voluntarily, with the buy-in of the entire global industry.

They have crafted a "sectoral" climate policy at a U.N. body called the International Civil Aviation Organization. The group has 190 member states, and it has announced goals of leveling aviation's total emissions by 2020 and cutting them in half by 2050, relative to 2005.

Environmentalists have agreed that climate is best addressed globally, but they protest that the ICAO goals are voluntary and that Europe is taking action more quickly.