EU Court upholds greenhouse gas scheme against US airlines challenge

2 January 2012 by

Case C-366/10 The Air Transport Association of America and Others, judgment of the CJEU, 21 December 2011 Opinion of Advocate-General Kokott, 6 October 2011

On 1 January 2012, the EU Emissions Trading Scheme started applying to airlines for real. So it was perhaps no coincidence that just before Christmas, and rather more speedily than usual, the EU Court (the CJEU) effectively threw out a challenge by US airlines to the scheme brought in the UK Courts which was referred to the CJEU. The airlines had said that a raft of international rules and conventions were inconsistent with the scheme. The UK denied the unlawfulness; it said, if you want to land in the EU, you have to obey EU rules. I posted on the Advocate-General’s opinion, and the Court has come to the same conclusion albeit by a slightly different route. But, first, what are these emissions trading schemes about?

 

The 2008 aviation emissions trading scheme was grafted on to a 2003 Directive applicable to various heavy industries. To date, the airlines have just had to register for the scheme. As of yesterday, their emissions start to count. Airlines collectively have to emit fewer emissions as the scheme goes on; the cap is 97% of baseline emissions (those in 2004/6) by the end of 2012, and 95% between 2013 and 2020. Each airline is given or buys allowances, which are then surrendered against actual emissions at the end of the relevant scheme period. In year one, 85% of the allowances are dished out free, with the remaining 15% auctioned. If an airline emits less than its allocated share, it can sell its surplus. If it emits more, it has to buy the balance, or face fines of 100 euros per tonnes of CO2 – and a 747 emits about 170 tonnes of CO2 when flying from London to New York. The emissions are measured principally by looking at how far the aircraft had flown – as some sort of measure for how many tonnes of greenhouse gases had been emitted by the aircraft.

The best short summary of the airlines’ argument can be found in the A-G’s opinion:

42.      In essence, the claimants and the interveners supporting them are challenging Directive 2008/101 on three grounds: First, they contend that the European Union is exceeding its powers under international law by not confining its emissions trading scheme to wholly intra-European flights and by including within it those sections of international flights that take place over the high seas or over the territory of third countries. Secondly, they maintain that an emissions trading scheme for international aviation activities should be negotiated and adopted under the auspices of the ICAO [an international organisation] it should not be introduced unilaterally. Thirdly, they are of the opinion that the emissions trading scheme amounts to a tax or charge prohibited by international agreements.

The first task of the court when faced with a challenge to an EU law via international law rules is to decide some preliminary questions as to whether the challenger can rely on those rules. The questions were summarised by the CJEU:

52      First, the European Union must be bound by those rules……..

53      Second, the Court can examine the validity of an act of European Union law in the light of an international treaty only where the nature and the broad logic of the latter do not preclude this ……

54      Finally, where the nature and the broad logic of the treaty in question permit the validity of the act of European Union law to be reviewed in the light of the provisions of that treaty, it is also necessary that the provisions of that treaty which are relied upon for the purpose of examining the validity of the act of European Union law appear, as regards their content, to be unconditional and sufficiently precise……

55      Such a condition if fulfilled where the provision relied upon contains a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure…..”.

The US airlines had backed a whole host of horses gathered from international aviation law, but most of them fell at this set of fences; even if there had been breaches, they would not have been of such a nature that the airlines could rely on them in saying that the scheme was invalid.

Those contentions that cleared these fences are set out right at the end of the judgment.

1.      The only principles and provisions of international law…..that can be relied upon…for the purpose of assessing the validity of Directive 2008/101/EC….are:

–        first, within the limits of review as to a manifest error of assessment attributable to the European Union regarding its competence, in the light of those principles, to adopt that directive:

–        the principle that each State has complete and exclusive sovereignty over its airspace,

–        the principle that no State may validly purport to subject any part of the high seas to its sovereignty, and

–        the principle which guarantees freedom to fly over the high seas,

–        and second:

–        Articles 7 and 11(1) and (2)(c) of the Air Transport Agreement concluded on 25 and 30 April 2007 between the United States of America, of the one part, and the European Community and its Member States, of the other part, as amended by the Protocol, and

–        Article 15(3) of that agreement, read in conjunction with Articles 2 and 3(4) thereof.

The short answer to the first, namely complaints about loss of sovereignty, was that the Directive’s reach was essentially founded on presence in the EU, whether landing or taking off. Hence:

126    Nor can such application of European Union law affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is not subject, in so far as it does so, to the allowance trading scheme. Moreover, such an aircraft can, in certain circumstances, cross the airspace of one of the Member States without its operator thereby being subject to that scheme.

127    It is only if the operator of such an aircraft has chosen to operate a commercial air route arriving at or departing from an aerodrome situated in the territory of a Member State that the operator, because its aircraft is in the territory of that Member State, will be subject to the allowance trading scheme.

So, on the sovereignty issues, it all comes down to choice; US airlines do not have to fly to Europe. If they don’t land in or take off from the EU, they are not subject to the scheme. If they do, they do.

Now from the general principles of international law to the three specific Treaty provisions which did clear the initial fences:

Article 7 of a EU/USA “Open Skies Agreement” (2007, supplemented in 2010) which says that the laws and regulations of one Party within its territory are also to apply to aircraft and the passengers, crew and cargo on aircraft of the other Party and are to be complied with by them.

Article 11(1) and (2)(c) of the Open Skies Agreement exempt from taxes, duties, fees and charges, on the basis of reciprocity, inter alia fuel introduced into or supplied in the territory of the European Union for use in an aircraft of an airline established in the United States engaged in international air transportation, even when the fuel is to be used on a part of the journey performed over the territory of the European Union.

The third provision is contained in Article 15(3) of the Open Skies Agreement, under which the parties are to apply any environmental measures affecting air services in accordance with the principle of fair and equal opportunity, in a non-discriminatory manner and in a way which must not prejudice the airlines’ prospects in competition with each other.

The CJEU said that the scheme did not offend any of these provisions. The answer by the CJEU to the Article 11 Open Skies allegations (concerning taxes, duties, fees and charges) is of some wider interest. The scheme does not impose a tax etc:

139    Furthermore, while the ultimate objective of the allowance trading scheme is the protection of the environment by means of a reduction of greenhouse gas emissions, the scheme does not of itself reduce those emissions but encourages and promotes the pursuit of the lowest cost of achieving a given amount of emissions reductions. ….

140    It also follows that the economic logic of the allowance trading scheme consists in ensuring that the reductions of greenhouse gas emissions required to achieve a predetermined environmental outcome take place at the lowest cost. In particular by allowing the allowances that have been allocated to be sold, the scheme is intended to encourage every participant in the scheme to emit quantities of greenhouse gases that are less than the allowances originally allocated to him, in order to sell the surplus to another participant who has emitted more than his allowance…..

141    It is true that in the case of the aviation field the European Union legislature….chose to take the fuel consumption of the operators’ aircraft as a basis for establishing a formula enabling calculation of those operators’ emissions in connection with the flights falling within that annex performed by their aircraft. Aircraft operators must therefore surrender a number of allowances equal to their total emissions during the preceding calendar year, which are calculated on the basis of their fuel consumption for all their flights falling within that directive and an emission factor.

142    However, in contrast to the defining feature of obligatory levies on the possession and consumption of fuel, there is no direct and inseverable link between the quantity of fuel held or consumed by an aircraft and the pecuniary burden on the aircraft’s operator in the context of the allowance trading scheme’s operation. The actual cost for the operator….depends….not directly on the number of allowances that must be surrendered, but on the number of allowances initially allocated to the operator and their market price when the purchase of additional allowances proves necessary in order to cover the operator’s emissions. Nor can it be ruled out that an aircraft operator, despite having held or consumed fuel, will bear no pecuniary burden resulting from its participation in the allowance trading scheme, or will even make a profit by assigning its surplus allowances for consideration.

So the scheme did not impose a tax etc because the airlines could operate in such a way that they did not incur any net cost on acquiring the allowances which they needed – hence there was no “direct and inseverable link” between fuel consumed and any cash expended on compliance with the scheme.

When all is said and done, the airlines may think themselves lucky. They emit 3% of the EU’s carbon (6% of the UK’s), and face a reduction of 5% of their emissions from their 2004-6 baseline by 2020. Other heavy industry has to reduce its emissions by 20% in 2020 measured against a 1990 baseline. And aviation emissions doubled between 1990 and 2004-6.

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4 comments


  1. Bryan Murphy says:

    And as if to prove my point, the Chinese now say they won’t pay anyway …

  2. Bryan Murphy says:

    I can’t help but feel there’s an element of Captain Ahab pursuing the white whale here. China has plans to build another 70 airports; the increased air traffic they must be planning will well and truly outweigh any feeble gesture on the EU’s part. As is often pointed out, if the UK became carbon neutral overnight the Chinese alone will have made up the difference within two years, never mind the Russians, Indians and Brazilians.

    I suppose you could at least say that the EU will be able to reduce the emissions of airlines flying into Europe, as opposed to, say, its hapless effort with the steel manufacturers who lobbied successfully to have far more carbon credits than they actually needed, and hence gained a massive windfall at the taxpayers’ expense (and always retained the ability to shift production outside the EU, thereby depriving the EU of jobs and taxes, with zero environmental benefit). This pattern is repeated elsewhere as Captain Ahab chases Moby – eg encouraging diesel cars on the basis they emit less C02 – but in fact diesel particles are a real airborne pollutant (C02 of itself is not), thus inflicting substantial environmental damage whilst saving as ever no more than a fraction of a percent of overall CO2 emissions …

  3. […] carbon taxes on airlinesZee NewsAIRLINE TAXES ARE BAD FOR PASSENGERS AND THE ECONOMYExpress.co.ukEU Court upholds greenhouse gas scheme against US airlines challengeUK Human Rights Blog (blog)all 62 news […]

  4. […] prices. Spending that results from …Lufthansa to pass carbon scheme costs to passengersReutersEU Court upholds greenhouse gas scheme against US airlines challengeUK Human Rights Blog (blog)India to protest EU carbon tax on airlinesBusiness Standardall 23 news […]

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retrospectivity rev paul nicholson reynolds Reynolds defence Re [2012] EWCA Civ 1233 richard III Richard O'Dwyer right of appeal rightsifno RightsInfo rights of children Right to a fair hearing right to a fair trial right to a home right to a remedy right to artistic expression right to a student loan right to autonomy right to autonomy and privacy right to die right to dies right to die with dignity right to dignity right to education right to expression right to family life right to food right to free enjoyment of possessions right to information right to liberty right to life right to peaceful enjoyment of property Right to Privacy right to private and family life right to refuse treatment right to respect for private life right to silence right to strike right to swim right to truth right to vote Rihanna Rio Ferdinand riots ripa rise of fascism risk risk assessment rival supermarkets Roma Roman Catholic Roman Catholic Church roman catholic schools Romania Rooney's Gold roundup roundup ready Royal Brompton and Harefield NHS Foundation Trust royal dutch petroleum royal name Royal Oper House Royal Prerogative rule of law Rupert Jackson Rusal Russia russia and human rights Russian Federal Security Service Rutherford Ryanair s sadie frost Safari same-sex same sex parents same sex partnerships same sex relationship sanctions set aside sanctity of life Sandiford Sapiens Sarah Ferguson sark satire saudi arabia Savage (Respondent) v South Essex Partnership NHS Foundation Trust Saville Report schedule 7 schizophrenia school building school surveillance schrems science scientific atheism scientific research scientology Scoppola Scotland Scotland Act Scotland Act 1998 Scotland Bill Scottish Government Scottish Human Rights Commission scottish landlord and tenant Scottish Parliament SCOTUS sea fishing seals Seal v UK search engines search powers secondary legislation secondary smoking secrecy Secretary of State Secretary of State for the Home Department v AP secret courts secret criminal trial secret evidence secret justice Secret trials sectarianism secularism security security cameras security services security vetting Sedar Mohammed segregation Select Committee on AI self-defence self-incrimination seminar sentencing September 11 serco serious harm sermon Seroxat service outside jurisdiction set-off Sewel Convention sex abuse sex ban sex ban low IQ sex offender Sex offenders sex register sexual abuse Sexual Offences sexual orientation sexual orientation regulations SFO investigation sfo unlawfulness shaker aamer Shamima Begum sham marriage shared residence order Sharon Shoesmith shetland shipping shipwreck Shirley Chaplin shooting shoulder shrug should trees have rights SIAC sihkism Simon Singh sir alan ward Sir Nicholas Wall Sir Peter six months rule slander slaughterhouses slavery smacking small claims court small solar Smith Smith & Ors v The Ministry of Defence [2012] EWCA Civ 1365 smog smoking ban Snyder v Phelps social and economic rights social benefits social housing socialite social media social security law social welfare social workers Solicitorsfromhell website solitary confinement soma somali pirates sources South Africa south african constitution sovereignty Sovereignty clause soviet union soybean Spanish properties spare room subsidy special advocate special advocates species specific performance spending cuts spielmann squatters Standing standing rules starvation state immunity statelessness statute statutory power Statutory purpose stay of execution stem cell research stem cells stem cell therapy Stephen Gough stephen sedley stepping hill hospital Sterilisation steve macqueen Steven Neary stobart-law stop and search stop powers Stormont Assembly storms Strasborug Strasbourg Strasbourg Court strasbourg damages pirates strasbourg law Strasbourg terminology strategic environmental assessment strike strike out Strikes student loans sturgeon subsidies Sugar v BBC suicide suicide act 1961 super injunction super injunctions supermax prisons superstition Supreme Court Supreme Court Live Supreme Court of Canada Supreme Court Scotland surgery surrogacy surrogacy arrangement surveillance swine flu Syria systemic violence Take That tallinn tariff Taser Tax tax avoidance tax discrimination tchenguiz technology Telegraph telephone preference service television justice tenancy tent city termination termination of pregnancy terror asset freezing Terrorism terrorism act terrorism act 2000 terrorism legislation terrorism prosecution terrorist finance terrorist threat terry pratchett Tesla testamentary dispositions The Bike Project the Catholic church The Corner House theism The Law in These Parts therapy Theresa May the right to privacy The Stig The Sun third countries third party appeals three way case time limits time limits in human rights Tobacco tobacco cartels Top Gear tort Torture torture inquiry totally without merit TPIM TPP tracking trade trade secrets trades unions trade union congress Trade Unions transexual transsexual transsexuals travel travellers travel restrictions treason treatment treaty treaty accession trial by jury trolling TTIP TTM v London Borough of Hackney & Ors Tugendhat tumour Turkey tweeting in court Twitter twitter in court Twitter Joke Trial UK UK citizenship uk constitution UK election UK Human Rights Blog UK Human Rights Roundup UKIP UK Jewish Film Festival ukraine UK Supreme Court UK Uncut ultra orthodox jews ultra vires UN unable to vote unacceptable behaviour policy unaccompanied minors unborn child UN Convention on the Rights of the Child unelected judges unemployment unfair consultation unfair dismissal unfairness at hearing Unison Unite United Against Fascism Group United Kingdom United Nations United States United States v Windsor universal declaration of human rights universal jurisdiction Universal Periodic Review University University Fees university of east anglia University of Southampton unjust and oppressive unlawful arrest unlawful detention unpaid work schemes UN Resolution unsolicited calls UPR US aviation US Constitution use as of right US Supreme Court vaccination Valkyries variants veganism vehicle breakdown vetting and barring vicarious liability victim victim status Victoria Climbie victorian charter Vienna airport vigilantism villagisation vinton cerf violence violist visa scheme vivisection voluntary euthanasia Volunteers voter compensation voters compensation voting voting compensation vulnerable Wagner Wakefield Wales War war correspondents ward of court War Horse water utilities Watts Wayne Rooney Websites welfare of child welfare of children welfare of the child welfare state welsh bill western sahara whaling What would happen if the UK withdrew from the European Court of Human Rights whimbrel whisky Whistleblowing WHO who is JIH whole gene sequencing whole life orders whorship Wikileaked cable Wikileaks wiklleaks Wild Law wildlife Wildlife and Countryside Act will William Hague William Marbury wills wind farms wind turbine Winterbourne View witchcraft withdrawal of treatment wolves women's rights Woolas worboys Workers working time directive wrongful birth wrongful conception wrongful life WTO wuhan X AND OTHERS v. AUSTRIA - 19010/07 - HEJUD [2013] ECHR 148 X Factor XX v Secretary of State for the Home Department [2012] EWCA Civ 742 X Y and Z v UK Yemshaw Yildirim v Turkey Your freedom website YouTube yukos Yuval Noah Hariri Zakir Naik Zanu-PF Zero Hours Contracts ZH (Tanzania) v Secretary of State for the Home Department Zimbabwe Zimbabwe farm invasions ZN (Afghanistan) (FC) and others ZZ [2015] CSIH 29 [2015] CSOH 168 £750

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