EU airlines could be ETS victims over definition of 'equivalence' as non-EU states seek exemption from scheme
Wed 2 Nov 2011 – The initial Opinion delivered by Advocate General Kokott to the European Court of Justice in October states that the EU emissions trading legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law. It also confirms that the EU Emissions Trading Scheme (ETS) is compatible with relevant international agreements. With a growing number of states challenging the scheme, including some within the EU itself, it seems likely that the Advocate General’s Opinion is likely to increase legal wrangling rather than resolve the issue, writes Mike Ambrose (right) of the European Regions Airline Association.
Whatever the long-term legal situation might become, the existing ETS legislation seems likely to remain in place. It is therefore possible that the provision (within the legislation) to exempt non-EU operators, for which equivalent environmental measures are applied in their home state, will assume even greater relevance. The difficulty that lies therein is the determination of equivalence.
EU processes inevitably work on a political level and it seems probable that testing equivalence will be no exception. However, if the issue is examined in a more objective manner, the European Commission is faced with a distinctly unenviable problem. The first requirement, of course, is to determine not only the cost burdens borne by carriers through emissions trading and the scope of the scheme – for these are relatively easily quantified – but the measured environmental effectiveness of the ETS.
The EC will need to be able to demonstrate with factual data how the ETS contributes to actual environmental protection and environmental performance improvement: this is far harder to determine and the predictions of consultants should not be categorically relevant. If consultants’ opinions were to be the main basis on which equivalence is to be determined, the absurd situation would exist in which states seeking exemptions for their carriers could argue that “my consultants say that my scheme is just as, or more, effective than yours”. Hard data is a prerequisite.
There is also the problem of cost burden equivalence. Suppose one non-EU state implements a charge on all carriers that replicates the ETS in Europe but at a quarter of the costs. Suppose, additionally, that all the revenue collected by this state is ring-fenced within the enabling legislation for research and development on aviation environmental protection measures. What happens then?
No such ring-fencing is stipulated within the ETS. Indeed, it is predictable that EU states, desperately short of cash, are likely to use ETS auctioning revenue for their own purposes, not necessarily for environmental protection or research. What would the EU position be on equivalence were the EU ETS to require higher cost burdens with far lower environmental protection effectiveness? How would the international competitiveness of long-haul EU operators be protected by the EU?
The current Commission has inherited a complex problem. It has inherited it from its predecessors and the extreme views of certain members of the ‘Greens’ (the credibility of ‘Greens’ would benefit immeasurably were more moderate views to become commonplace) and the arrogance of a culture that says “the EU knows best”.
If equivalence is to be credible, and EU airlines are not to be disadvantaged for the sake of political convenience, the Commission must be able demonstrate equivalence using a consistent, robust and transparent methodology.
Mike Ambrose is the Director General of the European Regions Airline Association (ERA)
This article was first published in Regional International, November 2011 issue and reproduced with the kind permission of the ERA. (Regional International is now available as a free App for the iPhone and iPad - search for 'Regional International' at the App Store)