Dec. 22 (Bloomberg) -- The European Court of Justice made a bad situation a little worse yesterday when it upheld a law allowing the European Union to charge international airlines for their carbon emissions.
The regulations require all commercial aircraft taking off or landing in 30 European nations to participate in the EU’s emission-trading system, known as ETS. China, India, Russia, the U.S. and at least 22 other countries have protested, correctly in our view, that the ETS represents an inappropriate extraterritorial application of national law.
Indeed, starting Jan. 1, airlines will have to account for -- and later, if they exceed certain allowances, pay a penalty on -- emissions produced during the entire length of a journey to and from a destination in Europe, not just those within European airspace.
The Air Transport Association, the trade group for the largest U.S. airlines and freight carriers that initially brought the court challenge, says that, for example, only 8.7 percent of the emissions produced by a flight between San Francisco and London will occur in EU airspace, yet the airline will be accountable to the ETS for the full distance. The industry estimates it will cost U.S. companies $3.1 billion to comply with the rule through 2020. (Analysts at our sister operation Bloomberg Government put the cost between $2.1 billion and $4.2 billion depending on the cost of carbon allowances.)
Beyond the cost, which would undoubtedly be passed on to the consumer, the European plan could set back the realization of the very goal it sets out to achieve: a meaningful reduction in harmful emissions.
As Secretary of State Hillary Clinton and Transportation Secretary Ray LaHood correctly pointed out in a letter to the European Commission last week, an effective response to the very real problem of emissions by airlines needs to be made through a global framework. The U.S. is right to insist that the appropriate forum for resolving this issue is the United Nations’ International Civil Aviation Organization, which has been remarkably efficient in administering international aviation since 1944.
A meaningful and global mechanism for regulating carbon emissions by aircraft is all the more urgent as the industry expects 3.3 billion people to travel by air in 2014, an increase of 800 million from 2009. Indeed, the UN body said Nov. 30 that it hopes to present an initial proposal as soon as next month.
Yet the European law will throw a wrench into any such discussions. It is also exacerbating tensions over trade at a time when the faltering global economy can least afford it. The ETS has already been met with vague bills in Congress that would forbid American airlines from complying and with unspecific threats of retaliatory measures by the Obama administration.
Fortunately, there still is time to put things on track. For the moment, the EU rule requires airlines to compile data about emissions and, if needed, acquire allowances, though no fees will be levied before April 30, 2013.
That 14-month delay should be put to use by the International Civil Aviation Organization to come up with an effective and equitable system for regulating airplane emissions that all nations can embrace.
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