Tue 26 July 2016 – The continued inclusion of flights between the EU and Switzerland in the EU Emissions Trading Scheme (EU ETS) is justified and legal, a senior advisor to the European Court of Justice (ECJ) has ruled. The ‘Stop the clock’ decision by the EU in 2013 to temporarily suspend the obligation for airlines to monitor and report emissions and to surrender allowances in respect of flights between EEA States – EU plus Iceland, Norway and Liechtenstein – and most third countries did not extend the moratorium to Switzerland. In the ongoing case, Swiss International Air Lines (SWISS) has argued this was unequal treatment under EU law and is seeking recompense for the allowances it was required to purchase and surrender to cover emissions from flights between EEA States and Switzerland in 2012.
SWISS brought the challenge against the UK government in the High Court in London since the Lufthansa-owned airline is administered under the EU ETS by the UK. The application was dismissed but the Court of Appeal subsequently decided to stay the proceedings and refer the case to the EU’s highest court for a preliminary ruling.
The airline is seeking an undisclosed sum to cover the allowances it was required to purchase and surrender in respect of its 2012 emissions. The EU Transaction Log shows SWISS emitted 1.23 million tonnes of CO2 during the year on flights to and from EEA airports. It received nearly 600,000 free allowances, leaving it to make up a shortfall of 629,035 allowances. The airline is also seeking damages for being discriminated against under the EU principle of equal treatment.
The EU justified that flights to and from Switzerland should not be treated as between the EEA and third countries, and so subject to the temporary derogation, on the grounds that to do so would create a distortion of competition and would undermine the integrity of the EU ETS.
In his Opinion delivered last week, Advocate General Saugmandsgaard Øe said the principle of equal treatment is not recognised under public international law and nor is there a general principle, in its external relations, obliging the EU to accord third countries equal treatment in all respects. “The European Union is not therefore required to treat equally flights between Member States of the EEA and Switzerland, on the one hand, and flights between EEA Member States and the other third countries, on the other, the difference in treatment as between those air routes being comparable to different treatment of third countries,” he says. “Nor is the Union under any obligation to treat operators of those two categories of flights equally.”
The ECJ is not obliged to follow the Advocate General’s Opinion but does so in the majority of cases. The court’s judgment normally follows between three and six months after the Opinion.
The EU and Switzerland started negotiations of linking their respective emissions trading schemes in 2011, which would allow covered entities in both systems to trade emissions permits with each other and create a level playing field. However, the talks suffered a setback at the beginning of 2014 when a referendum in Switzerland voted to back a proposal to limit immigration quotas from the EU and prompted retaliation from Brussels. Another point of argument between the two sides was over the inclusion of Swiss aircraft operators into the Swiss ETS when the link between the two schemes entered into force.
According to an announcement by the Swiss Federal Office for the Environment (FOEN), negotiations on the linkage were concluded this past January, with aircraft operators to be included in the Swiss ETS, and an agreement was initialled. However, the treaty must still be ratified by both sides. “The timetable for this open,” it said.
Advocate General’s Opinion in full
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