US DOT official warns of damaging trade war between US and EU over EU ETS as ECJ announces date of ruling on US airline case
Tue 6 Dec 2011 – The EU will find it very difficult to enforce its unilateral Aviation EU ETS legislation on the rest of the world, Paul Gretch, Director of the Office of International Aviation at the US Department of Transportation (DOT), told a London conference today. “I fear we’re heading towards a trade war airlines and the economy cannot afford,” he said, adding that despite an anticipated ruling by the European Court of Justice to the contrary, the scheme was illegal and contravened US-EU bilateral agreements. Gretch revealed that President Obama had “forcibly” made clear the US opposition to European Commission President Barroso at a recent summit meeting.
Meanwhile, the European Court of Justice is now expected to deliver its ruling on December 21 concerning the case brought by the Air Transport Association (now renamed Airlines for America) and US airlines American and United/Continental over their inclusion in the EU ETS.
Gretch told the ‘Future of Air Transport’ conference that present US administration policy was “pro-environmental action” and was not opposed to market-based solutions for reducing emissions but the EU was pursuing its goals in the wrong way by its unilateral inclusion of the world’s airlines into the EU ETS.
He said the fight over the EU ETS had proved a heavy distraction from achieving a global solution through ICAO and described the declaration by 26 states in Delhi in September as “a meeting of the disgruntled” and refuted allegations that the US had been manipulating other states behind the scenes. The senior US official said there was talk of a further such meeting in the new year.
He described the EU’s offer to negotiate with other states over equivalent carbon reduction measures from aviation as “a recipe for chaos and discrimination” and said the US knew of no other state that was seriously considering such a move. The refusal of many EU states to ring fence EU ETS auction revenues for environmental purposes and use them instead to prop up their treasuries had, he said, played into the discussions taking place in the US Congress over the issue.
In a side interview with GreenAir Online, Gretch said US airlines would be in “an extremely bad position” if they were to be faced with both a requirement to comply with EU law on the ETS and also a possible US law prohibiting their participation. He believed that regardless of the success or failure of the proposed legislation passing through Congress, there would be considerable pressure on the Secretary of Transportation to carry out retaliatory action, either by imposing financial measures or by amending the permits of EU airlines. “Those tools are absolutely there,” he said.
Further to President Obama’s direct reference to the Aviation EU ETS in a November US-EU summit meeting in Washington, Gretch added that the EU could expect further high-level contact on the issue in the near future. He said a regular US meeting with the EU under their bilateral agreement this coming Thursday (December 8) would discuss the EU ETS, but at the request of the EU. The US would also be raising its concerns over the issue of night-time bans at EU airports, he said, which were having an impact on US express carriers.
Referring to a previous US legal battle with the EU in the 1980s, Gretch said: “Even given the problem we had over the EU’s aircraft engine hushkit ban, I don’t think we’ve ever seen anything quite like this current situation. The hushkit legislation was badly designed and the EU was able to pull back.”
Whereas the hushkit row was between the US and EU, this time around, he said, the dispute was essentially the EU against the rest of the world.
With the EU ETS formally starting in just three weeks time, Gretch accepted it was unrealistic to expect the EU to amend its legislation at this late stage but he said the EU could make changes before March 2013 when the main economic effects of the scheme would be felt as airlines had to surrender allowances for 2012.
Despite the call for a global solution on international aviation emission reductions, Gretch said he did not foresee a binding deal being achieved at ICAO. “But certainly ICAO could do more.”
Asked why the United States did not do more itself to lead on the issue at ICAO, he responded: “We only have one vote at ICAO and there is also a resistance to US muscle. Don’t overestimate our ability to get things done there – it is more limited than ever before.”
In a further development on the passage of the H.R. 2594 bill that was passed by the House of Representatives in October, unconfirmed sources suggest the Senate could see the introduction of a mirror bill within the next week.