The EU’s war on planes leaves UK trade grounded
WE ARE witnessing the opening skirmishes of a trade war between the EU and the rest of the world. This is unnecessary, costly for the European economy, and self-defeating.
How did we get here? Under European law, an airline (wherever based) which operates flights that take off or land in the EU must, from next year, surrender greenhouse gas emission allowances corresponding to its emissions during the preceding calendar year. Some of these allowances it may obtain for free; others it will need to pay for. There is no legal obligation that revenue generated from the scheme be directed to environmental purposes.
If you are an airline operating a flight from Los Angeles to London you need to include your emissions for the whole journey: from when the aeroplane is taxiing in LA, to when it parks in London. Understandably, this has caused considerable alarm worldwide, with the EU accused of applying its rules extra-territorially. This is despite the fact that some believe that airlines may derive a windfall from the scheme, while taking advantage of historically low carbon prices.
Airlines for America (formerly Air Transport Association of America) brought a case in the Court of Justice of the EU, seeking to have the aviation emissions trading scheme declared unlawful. The Court predictably dismissed the case last December, prompting the EU’s climate commissioner, Connie Hedegaard, to tweet, “US airlines challenged EU law in court. After crystal clear ruling today, EU now expects US airlines to respect EU law, as EU respects US law.”
But the US will not be cowed so easily. Congress is expected shortly to express its formal opposition to the scheme; China, as we have learned this week, has actually banned its airlines from participating. Around the world, opposition is growing. The European Commission will not retreat, but indicated that negotiation is possible if other countries introduce equivalent measures to address aviation emissions.
If airlines refuse to comply, they face penalties, including a €100 (£83) charge per tonne of carbon dioxide equivalent for which the airline has not surrendered its required allowances. The EU may ultimately ban the airline from flying. Comply, or don’t fly.
The EU argues that unilateral action was necessary, owing to the slow progress in reaching a global sectoral deal for aviation emissions. The EU’s decision to “nudge” the world into action can only be harmful. It discourages business travel to and from the EU, and can only encourage the eastwards shift of economic power, as airlines and businesses increasingly operate from Gulf hub airports. It damages the European economies (whether or not in the Eurozone) at a time of particular and historic fragility. The question, in my view, is not whether this policy is sustainable, but for how long.
Jeremy Robinson is a Partner at aviation law firm Gates and Partners Solicitors.