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Airlines must pay for carbon emissions on European flights, high court rules

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Europe’s highest court ruled Wednesday that the European Union has the legal right to force foreign airlines to pay for their greenhouse gas emissions, a decision that could boost ticket prices but also encourage airlines to curb their carbon output.

Starting in January, any airline that lands or takes off in Europe will have to offset the greenhouse gases it emits during the flights by buying carbon allowances as part of the E.U. Emissions Trading Scheme (ETS). The European Commission estimates that the carbon permits could add a cost of $2.66 to $15.96 per ticket over the coming decade.

The Obama administration, U.S. airlines and more than 40 other nations have fought the policy on the grounds that any carbon fee applying to international flights should be established by the International Civil Aviation Organization, the U.N. body charged with setting standards for international aviation. That body’s delegates have studied the issue for 14 years but failed to reach a consensus.

The industry trade group Airlines for America (A4A), American Airlines and United Continental filed suit against the rules in the European Court of Justice, saying E.U. officials had overstepped their authority in imposing their climate policy on foreign airlines. In a statement Wednesday, the European Court of Justice said that was not the case because it applies only to aircraft either landing or taking off in Europe.

“In this context, application of the emissions trading scheme to aircraft operators infringes neither the principle of territoriality nor the sovereignty of third States, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the Member States of the EU and are thus subject to the unlimited jurisdiction of the EU,” the statement read.

E.U. officials, such as European Commissioner for Climate Action Connie Hedegaard, have argued they needed the policy because emissions from airlines have doubled since 1990 and could triple by the end of the decade.

“A number of American airlines decided to challenge our legislation in court and thus abide by the rule of law,” Hedegaard said in a statement. “So now we expect them to respect European law. We reaffirm our wish to engage constructively with everyone during the implementation of our legislation.”

Airlines for America issued a statement saying its members would “comply under protest” but continue to seek a reversal of the E.U. policy. The case now returns to the U.K. High Court — where airlines had originally brought suit by challenging British regulations implementing the law — which is obligated to carry out Wednesday’s ruling.

“Today’s court decision further isolates the E.U. from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change,” the statement read. “Today’s decision does not mark the end of this case and A4A is reviewing options to pursue in the English High Court. “

But Annie Petsonk, international counsel at the advocacy group Environmental Defense Fund, said the E.U.’s airline policy is the kind of “bottoms-up” approach that can begin to address global warming as international negotiators work to craft a new international climate pact. Environmentalists have urged U.S. airlines to switch to biofuels and adopt airplane designs that could cut their fuel use.

“It is high time airlines actually live up to their green claims and comply with the E.U. law, which will cut pollution and spark low-carbon innovation,” Petsonk said.

Although the United States is not a party to the case, the State Department’s deputy assistant secretary for transportation affairs, Krishna R. Urs, suggested it would also fight the E.U.’s imposition of carbon fees through diplomatic means. The Transportation Department has a voluntary program aimed at cutting the airline industry’s greenhouse gas emissions but no mandatory measures. The United States has a number of tools at its disposal, including filing a complaint with the International Civil Aviation Organization; seeking arbitration directly with Europe through bilateral aviation agreements; and a series of retaliatory measures the transportation secretary can impose, ranging grom fining European carriers to restricting their access to the United States.

“We continue to have strong legal and policy objections to the inclusion of flights by non-E.U. air carriers in the E.U. [Emissions Trading Scheme]. We do not view the court’s decision as resolving these objections,” Urs said.

The airline industry will be able to minimize the cost of the new rules by buying relatively cheap carbon offsets and passing on a portion of the cost to consumers, according to a recent analysis by Bloomberg New Energy Finance. The out-of-pocket costs for the aviation industry amounts to just 0.24 percent of the revenue that will be generated with flying in and out of Europe next year and 0.54 percent of the revenue in 2020.

The House of Representatives passed a bipartisan bill last month that would order the transportation secretary to prohibit U.S. airlines from complying with the E.U. law, but it is unclear how that would shield companies from international penalties. Sen. John Thune (R-S.D.) has introduced a companion bill in the Senate that would give the transportation secretary that option. It has yet to pass.

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