Civil Aviation in the EU Emission Trading Scheme

By Pravir Singh Srivastava & Akanksha Sisodia, Symbiosis Law School, Noida

Editor’s note: In order to reduce greenhouse gas emissions effectively, the European Union established an emissions trading system. A ‘cap’ is set on the total amount of greenhouse gases that can be emitted – this cap now includes emissions from flights arriving and departing from EU airports (regardless of where the flight originates from). This paper analyses the effectiveness of such a mechanism, its compatibility with international law, and the global reaction to the same, which has been hugely positive.

Introduction

The EU emissions trading system (EU ETS) is a cornerstone of the European Union’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first and still by far the biggest international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines. The EU ETS works on the ‘cap and trade’ principle. A ‘cap’, or limit, is set on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. As a step towards global action to mitigate the climate impacts of aviation, the EU has imposed a cap on CO2 emissions from flights arriving at or departing from EU airports. Since 2012, emissions from international aviation are included in the EU Emissions Trading System (EU ETS). Like industrial installations covered by the EU ETS, airlines receive tradeable allowances covering a certain level of CO2 emissions from their flights per year.  The Paper shall analyze the legality and importance of market based mechanism for dealing with environmental pollution adopted by the European Union and the global resistance to such a regulation.

The legislation, adopted in 2008, applies to EU and non-EU airlines alike. Emissions from flights to and from Iceland, Liechtenstein and Norway are also covered. Croatia will become a full member of the EU ETS on 1 January 2014. Incoming flights can be exempted from the EU ETS if the EU recognizes that the country of origin is taking measures to limit aviation emissions from departing flights.

The EU has been seeking a global agreement to tackle aviation emissions through the International Civil Aviation Organization (ICAO) for more than 15 years. In November 2012 the Commission made a proposal to exempt from enforcement flights into and out of Europe operated in 2010, 2011, and 2012 to provide negotiation time for the ICAO General Assembly in autumn 2013. The legislation will continue to apply to all flights within and between the 30 European countries in the EU ETS. The Commission believes a global solution is within reach at the 2013 ICAO General Assembly. In its statement the Commission made clear that, should this meeting fail to make the necessary progress, the EU ETS legislation would be applied in full again to all flights to and from European airports.

ICAO has long recognized the role that market-based measures can play in achieving environmental goals cost-effectively and in a flexible manner. For the EU, an agreement in ICAO on market-based measures must include three key elements:

The Commission concluded that bringing aviation into the EU ETS is the most cost-efficient and environmentally effective option for controlling aviation emissions after undertaking a wide-ranging consultation of stakeholders and the public and analyzing several types of market-based solutions. Compared with alternatives such as a fuel tax, including aviation in the EU ETS provides the same environmental benefit at a lower cost to society – or a higher environmental benefit for the same cost.

The EU’s legislation on aviation emissions is compatible with international law. This was confirmed by the European Court of Justice on 21 December 2011 in a legal case brought by some US airlines and their trade association against the inclusion of aviation in the EU ETS.

The Court stated that the extension of the EU ETS to aviation infringes neither the principle of territoriality, nor the sovereignty of third countries and EU ETS does not constitute a tax, fee or charge on fuel, which could be in breach of the EU-US Air Transport Agreement.

Direct emissions from aviation account for about 3% of the EU’s total greenhouse gas emissions. The large majority of these emissions come from international flights. By 2020, global international aviation emissions are projected to be around 70% higher than in 2005 even if fuel efficiency improves by 2% per year. ICAO forecasts that by 2050 they could grow by a further 300-700%.Including aviation in the EU ETS is forecast to save around 176 million tones of CO2 emissions by 2015.

The success of the EU ETS has inspired other countries and regions to launch cap and trade schemes of their own. The EU aims to link up the ETS with compatible systems around the world to form the backbone of an expanded international carbon market. The European Commission has agreed in principle to link the ETS with Australia’s system in stages from mid-2015. However, the ETS also faces a challenge in the form of a growing surplus of allowances, largely because of the economic crisis which has depressed emissions more than anticipated. In the short term this surplus risks undermining the orderly functioning of the carbon market; in the longer term it could affect the ability of the EU ETS to meet more demanding emission reduction targets cost-effectively.

EU ETS and international Law

International law allows States to establish policies over the environment within their sovereign territory. This principle is confirmed by the UNGA Resolution on ‘Permanent Sovereignty over Natural Resources’ which provides that ‘the right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the State concerned.’[1] The customary law character of this resolution was affirmed by the ICJ in the case of Armed Activities on the Territory of the Congo.[2]

Moreover, UNGA Resolution on ‘Development and Environment’ states that ‘each country has the right to formulate, in accordance with its own particular situation and in full enjoyment of its national sovereignty, its own national policies on the human environment.’[3] The right of a State to exercise sovereignty over its natural resources is also supported by scholars’ opinions. For instance, Professor Sands argues that ‘the principle of State sovereignty allows States within limits established by international law to conduct or authorize such activities as they choose within their territories, including activities which may have adverse effects on their own environment.’[4]

Aircraft eject a number of chemical substances that affect atmosphere, such as carbon dioxide and water vapor,[5] which are caused by the combustion of jet fuel. The carbon dioxide may affect stratospheric cooling which in its turn may cause atmospheric thermal stratification, increase of polar stratospheric cloud formation, and reduce of ozone concentrations. In addition, nitric oxide and nitrogen dioxide constitute one of the most abundant aircraft emissions. The nitrogen dioxide has a strong impact on the environment, considering that (i) it soaks up visible solar radiation and unbalances atmospheric visibility; (ii) it absorbs visible radiation and potentially directly affects global climate change; (iii) it is, along with nitric dioxide, the main regulator of the oxidizing capacity of the free troposphere as it controls the composition and fate of radical species; (iv) it is crucial for determining of ozone concentrations.[6]

In addition, some studies demonstrate that ozone changes occurred due to aircraft emissions cause radioactive forcing[7]. Emission of nitric oxide and nitrogen dioxide contributes to the formation of photochemical smog and associated oxidant, deteriorating air quality and posing threat to human and ecosystem health.[8] Aircraft also emits sulphur dioxide and hydrocarbon. These emissions contribute to formation of sulphate and carbonaceous aerosols.[9] Overall, aircraft emissions have a significant impact on air quality.

Preliminary Consideration on Aviation Industry and Protection of Environment

The international community expressed its concerns in respect of environmental protection inter alia in the Rio Declaration on Environment and Development, the UN Framework Convention on Climate Change, and the Kyoto Protocol to the UN Framework Convention on Climate Change. These documents, in particular, call States to take measures on the protection of the environment.

ICAO pays a lot of attention to the impact of civil aviation on the environment. Indeed, the ICAO Assembly adopted environment-related resolutions on many occasions. For instance, during its 33rd session, the ICAO Assembly requested the Council ‘to promote the use of operational measures as a means of limiting or reducing the environmental impact of aircraft engine emissions.’[10] In addition, during this session the Assembly of ICAO recognized that negative impact of civil aviation on the environment can be reduced inter alia by application of market-based measures,[11] defined as ‘means of limiting or reducing the environmental impact of aircraft engine emissions’ and as ‘policy tools that are designed to achieve environmental goals at a lower cost and in a more flexible manner than traditional regulatory measures.’[12]

During its 37th session, ICAO Assembly requested States inter alia to ‘accelerate investments on research and development to bring to market even more efficient technology by 2020’[13] and to ‘accelerate the development and implementation of procedures to reduce aviation emissions.’[14] Thus, ICAO encourages States to take measures directed at aircraft emissions reduction.

Regulation 2008/101 and ‘polluter pays’ principle

With the introduction of the Regulation 101, European Union sought to enforce the firmly established ‘polluter pays’ principle,[15] formulated in the Rio Declaration on Environment and Development as follows: ‘National authorities should endeavor to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest.’[16]

The ‘polluter pays’ principle is considered as ‘a general principle of international environmental law’ in several international legal instruments such as the International Convention on Oil Pollution Preparedness, Response and Cooperation[17] and the Convention on the Trans-boundary Effects of Industrial Accidents.[18]

This principle has also been reflected in the Trail Smelter case. In this case the Tribunal prescribed the smelter company to reduce its activity to the level at which fume emissions do not cause injury anymore and obliged this company to pay compensation to the United States for causing harm to the interests of the United States in respect of fume emissions.[19]

In the case of Legality of Use of Nuclear Weapon, Judge Weeramantry, analyzing the ‘polluter pays’ principle among others principles of environmental law, described this principle as ‘not dependent for its validity on treaty provisions’, as a ‘part of customary international law’ and of ‘the sine qua non for human survival.’[20]

 The principle under question was also discussed by the ILC, observing that there is a variety of economic tools used by the States in their national laws and regulations to implement the ‘polluter pays’ principle. Such tools vary from imposition of pollution charges to imposition of fines and liabilities.[21] Accordingly, it is reasonable to conclude that the introduction of the Regulation 101 with the purpose of maintaining the natural beauty of Minipax and offsetting the cost of damages caused by aircraft emissions is compatible with existing State practices regarding the implementation of the ‘polluter pays principle’.

The ‘polluter pays’ principle should be considered together with the concept of sustainable development.[22] This concept was reaffirmed by the ICJ in the Gabcikovo–Nagymaros Project case. In particular, the court recognized that the ‘need to reconcile economic development with protection of the environment is aptly expressed in the concept of sustainable development.’[23]

State practices on imposition of emission-based fees

Sweden and Switzerland are among the first countries that introduced emission-based landing fees. In 1995 Swiss government adopted a law that allowed airports to levy emission charges on aircraft. The practice was introduced first at the Zurich airport and then at the Geneva airport, further expanding to other Swiss airports. In 1998, upon approval of the Swedish Civil Aviation Authority, several Swedish airports implemented a similar scheme.[24]

The legality of emission-based charges was confirmed by the Swiss Federal Court.[25] Currently, emission-based charges are also imposed in United Kingdom and France.[26] There is also an extensive practice of introducing so called ‘passenger taxes’ in order to address environmental concerns. For instance, in 1994, Norway enacted a law establishing a passenger tax on international and domestic flights in order to encourage the public to use other modes of transport.[27] It is noteworthy to mention that revenues generated by such tax are placed to general treasury. In the same year an air passenger duty was introduced in UK.[28]

The duty ‘becomes due when the aircraft first takes off on the passenger’s flight and shall be paid by the operator of the aircraft.’ The High Court of England and Wales has reached the conclusion that the air passenger duty does not violate Chicago Convention and thus, upheld the legality of such a duty. The same approach was confirmed by the Dutch Supreme Court with regard to the Dutch ticket tax, levied for environmental purposes.[29] Therefore, current State practices and court decisions demonstrate that taxation of air transportation for environmental purposes can be regarded as legal.

It is pertinent to note that even UN Charter stands testimony to all the measures which are taken to achieve solution to the contemporary international problems and with that purports to achieve international co-operation in promoting all such practices.[30] It is undisputed that environment is one of the major concerns. The increased sophistication in appreciating the risks to the earth’s environment, and the irreversible damage which may be caused by human activity, has resulted in a conscious effort, both by governments acting collectively and also by non-governmental organizations, to invoke legal protection of the environment.[31] The growing concern for environment has led to practices of states that provide support for number of emergent, but still evolving, legal principles. The best known for these is the “precautionary principle”.[32] It receives a support from 1992 Rio Declaration on Environment and Development[33], inter alia Principle 15 which states that the precautionary steps to protect environment must be taken by states according to their capabilities. This principle has been recognized and discussed in the 1974 Nuclear Tests case[34] and the Southern Bluefin Tuna case.[35]

Edited by Neerja Gurnani

[1] UNGA Res 1803 (XVII) (14 December 1962) Article 1

[2] Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda) (Judgement) [2005] ICJ Rep 168, [244].

[3] UNGA Res 2849 (XXVI) (20 December 1971).

[4] P Sands,  Principles of International Environmental Law (Cambridge University Press Cambridge 2003) 279.

[5]Intergovernmental Panel on Climate Change Aviation and the Global Atmosphere: a Special Report of IPCC Working Groups I and III in Collaboration with the Scientific Assessment Panel to the Montreal Protocol on Substances that Deplete the Ozone Layer (Cambridge University Press Cambridge 1999) 33.

[6] F Forastiere and others ‘Nitrogen Dioxide’ in World Health Organization Air quality guidelines: global update 2005: particulate matter, ozone, nitrogen dioxide and sulphur dioxide (WHO Regional Office for Europe Copenhagen 2006) 331

[7] PJM Valks and GJM Velders ‘The Present-day and Future Impact of NOx Emissions from Subsonic Aircraft on the Atmosphere in Relation to the Impact of NOx Surface Sources’ (1999) 17 Annales geophysicae 1064.

[8] BR Gurjar LT Molina and CSP Ojha (eds) Air Pollution: Health and Environmental Impacts (CRC Press Boca Raton 2008) 497.

[9] Intergovernmental Panel on Climate Change (n 45) 34

[10] ICAO ‘Consolidated Statement of Continuing ICAO Policies and Practices Related to Environmental Protection’ (2001) Assembly Resolution A 33-7, Annex H, 3(c).

[11] Ibid  Preamble.

[12] Ibid Appendix I, preamble recital 1 and 2.

[13] ICAO ‘Consolidated Statement of Continuing ICAO Policies and Practices Related to Environmental Protection – Climate Change’ (2010) Assembly Resolution A37-19, 23(c).

[14] Ibid 23(d)

[15] According to this principle ‘the costs of pollution should be borne by the person responsible for causing the pollution’: See P Sands Principles of International Environmental Law (n 44) 279. The purpose of such a principle is ‘allocating costs of pollution prevention and control measures to encourage rational use of scarce environmental resources’: See OECD Recommendation of the Council on Guiding Principles Concerning International Economic Aspects of Environmental Policies (26th May 1972) Cf. C/M(72)15(Final), Item 129(a), (b) and (c) – Doc. No. C(72)128 sec A (a)(4).

[16] UNGA ‘Report of the United Nations Conference on Environment and Development Annex I ‘Rio Declaration on Environment and Development’’ (1992) A/CONF.151/26 (Vol I) Principle 16

[17]  International Convention on Oil Pollution Preparedness, Response and Cooperation (adopted 30 November 1990, entered in force 13 May 1995) 1891 UNTS 51, preamble

[18] Convention on the Trans-boundary Effects of Industrial Accidents (adopted 17 March 1992 entered in force 19 April 2000) 2105 UNTS 457, preamble.

[19] Trail Smelter Arbitration (USA v Canada) (1941) 3 Rep Intl Arbitral Awards 1980

[20] Legality of the Threat or Use of Nuclear Weapons (Advisory Opinion) [1996] ICJ Rep 226, dissenting opinion of Judge Weeramantry.

[21] International Law Commission ‘Yearbook of International Law Commission, 1995, vol. II, Part One’ UN Doc A/CN.4/SER.A/1995/Add.1

[22] This concept can be defined as ‘the development that meets the needs of the present without compromising the ability to future generations to meet their own needs’: See D Freestone and L Boisson de Chazournes ‘Environmental Law: Concepts and Issues’ in I Serageldin, J Martin-Brown (eds) Partnerships for Global Ecosystem Management: Science, Economics, and Law: Proceedings and Reference Readings from the Fifth Annual World Bank Conference on Environmentally and Socially Sustainable Development, Held at the World Bank and George Washington University, Washington, D.C., October 6-7, 1997 (World Bank Publications 1999) 190.

[23] Gabčíkovo-Nagymaros Project Case (Hungary v Slovakia) (Judgement) [1997] ICJ Rep 7,[140].

[24] United States General Accounting Office: Aviation and the environment: strategic framework needed to address challenges posed by aircraft emission (Report to the Chairman, Subcommittee on Aviation, Committee on Transportation and Infrastructure, House of Representatives February 2003) 18.

[25] International Air Transport Association v the Government of the canton of Zurich (1999) ATF 125 I 182. Swiss Federal Court reached the conclusion that the introduction of emission based landing fee violates nor federal aviation law, nor Chicago Convention. In particular, the Court pointed out that as the contested legislation treats all airlines equally there is no violation of the non-discrimination principle in respect of airport charges set forth in article 15 of the Chicago Convention.

[26] ICAO ‘Environmental Report’ (2007)

[27] P Mendes de Leon and S Mirmina ‘Protecting the Environment by Use of Fiscal Measures: Legality and Property’ (1997) 62 Journal of Air Law & Commerce 791.

[28] Federation of Tour Operators & Ors, R (on the application of) v HM Revenue & Customs & Ors (2007) EWHC 2062, [8]

[29] B Havel and N Van Antwerpen ‘The Dutch Ticket Tax and Article 15 of the Chicago Convention’ (2009) 34 Air and Space Law 141 and 447

[30]  The Charter of The United Nations, GA Res 2625 (XXV), UN Doc A/RES/2625 (XXV) at Article 1(3).

[31]  Brownlie ‘A Survey of International Customary Rules of Environmental Protection’  (1973) 13 Natural Resources Journal, 179; Teclaff and utton International Environment Law (Praegar Michigan 1974); J Schneider World Public Order Of The Environmental (University of Toronto Press California 1979); FL Kirgis Prior Consultation In International Law (University Press of Virginia 1983); BD Smith State Responsibility and Marine Environment (Clarendon Press Virginia1988); AC Kiss and D Shelton International Environment Law (Graham and Trotman London 1991), Magraw International Law And Pollution (University of Pennsylvania Press Philadelphia 1991); H Hohmann Basic Documents of International Environmental Law (Graham and Trotman 1992) Vol 1-3; PN Okowa State Responsibility For Transboundary Air Pollution (Oxford University Press 2000).

[32]  Birnie and Boyle International law and the Environment (2nd edn Oxford University Press 2002) 115; Sands Principles of International Environmental Law (2nd edn Cambridge University Press 2003) 266; Freestone and Hey The Precautionary Principle and International Law (Kluwer Law International 1996)

[33] Rio Declaration on Environment and Development United Nations Conference on Environment and Development, June 3-14, 1992, U.N. Doc. A/CONF.151/5/Rev. 1, reprinted in 31 I.L.M. 874 (1992).

[34]  The 1974 Nuclear Tests case (New Zealand v France) 1995 ICJ 288, 342

[35] International Tribunal for the Law of the Sea (Request for Provisional Measures), 27 August 1999; ILR 117, at 172-4 (Laing); 179-80 (Treves); 186-7 (Shearer). See also Marr, Europ, Journ.11 (2000), 815-31

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