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European Union Postpones Greenhouse Gas Emissions Rules for International Aviation

March 21, 2013

 

On March 12, 2013, the European Union (“EU”) agreed to postpone implementation of its controversial plan to require international air carriers to participate in the EU’s Emissions Trading System (“ETS”) for flights to and from EU countries (see our November 13, 2012, Client Alert). The one-year delay is meant to provide time for the United Nations International Civil Aviation Organization (“ICAO”) to reach a global agreement on a plan to reduce greenhouse gas emissions from aviation. This action had been expected after the European Commission announced its support for a delay last November.

The move came after heated objections from the United States, China, Russia, and India, among others, coupled with threats of retaliation and non-compliance with the EU rules. In late November 2012, President Obama signed the European Union Emissions Trading Scheme Prohibition Act of 2011, which directs the Secretary of Transportation to prohibit U.S. carriers from participating in the ETS if the Secretary finds that the plan is contrary to the public interest. While current Secretary of Transportation Ray LaHood has not yet issued a prohibition order, he sharply criticized the ETS plan at a Federal Aviation Administration conference in early March. China and India have taken similar steps to prohibit their airlines from participating in the ETS, with China going so far as to freeze purchases of Airbus airplanes by Chinese airlines.

Had the agreement not been reached to postpone the ETS rules, international airlines would have been required to report their 2012 greenhouse gas emissions by March 31 and to surrender carbon allowances to cover those emissions by April 30.

The postponement only affects flights to and from EU-member countries, along with Norway, Iceland, and Liechtenstein. Flights between two European countries will still be subject to the ETS rules for 2012, even if the carrier is based in a non-EU country. Most major U.S. airlines operate intra-European flights through alliances with European-based carriers, which continue to be subject to current reporting requirements. Smaller U.S.-based operators, such as corporate jet services, may still face a difficult decision about whether to comply with EU emissions rules for flights between European cities and risk violating the potential U.S. prohibition.

The EU’s decision still must be ratified by the European Parliament and EU Council. The Parliament is expected to ratify the decision at its upcoming session in mid-April.

The focus now shifts to ICAO negotiations on a global aviation-emissions program. The EU has promised to enforce the ETS aviation rules against international carriers next year if the ICAO is unable to reach an acceptable deal. The ICAO has formed a High-Level Group on Climate Change to address the issue, and hopes to have a draft agreement in place ahead of the ICAO Assembly Meeting in late September 2013. The EU has said that any ICAO agreement must deliver emissions reductions that are at least equivalent to those under the ETS plan.

We will continue to monitor developments and update this Alert.



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