Airlines May Lose Battle Against EU’s New Carbon Emissions Cap

International airlines are likely to lose a challenge to the European Union’s planned expansion of its carbon cap-and-trade system to carriers beyond the bloc’s borders.

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“The inclusion of international aviation in the EU emissions trading scheme is compatible with international law,” said Advocate General Juliane Kokott, of the EU Court of Justice in Luxembourg, in a non-binding statement released today. In most cases, the court follows this advice, at least to some extent.

United Continental Holdings Inc. (NYSE:UAL), AMR Corp.’s (NYSE:AMR) American Airlines, and the Air Transport Association of America have all joined air carriers and representative groups around the world in challenging the EU’s attempt to extend its carbon cap-and-trade program — the world’s largest — beyond its borders. The EU regulator plans to impose carbon curbs on flights to and from the region’s airports, beginning in 2012.

EU Climate Commissioner Connie Hedegaard said today that she is “glad” to hear opinions about the new regulations, and that the EU reaffirms its wish to engage constructively with third countries during the implementation of this legislation.”

The U.S. government has already voiced “strong objections” to the EU’s inclusion of aviation in its emissions-trading system. “We maintain our strong legal and policy objections to the inclusion of flights by non-EU carriers in the EU-ETS,” said Deputy Assistant Secretary of State for Transportation Affairs Krishna R. Urs in a statement today.

Tony Tyler, director general of the International Air Transpor Association, said that the EU emissions trading scheme had many governments “rightly concerned about the infringements on sovereignty and the Chicago Convention.” The so-called Chicago Convention is the Convention on International Civil Aviation, a United Nations agency charged with coordinating and regulating international air travel.

Even British Airways said that, while supporting emissions trading, it was concerned about the uncertainty created by the continuing legal and political challenges to the cap-and-trade program. “The continuing uncertainty risks turning the scheme into an international trade dispute rather than an environmental solution to the issue of carbon emissions,” said Sophia Aantoniades, a spokesman for British Airways, which is a unit of International Consolidated Airlines Group SA.

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Environmental groups are applauding the new measures, arguing that the law does not violate sovereignty. “It is by no means unusual for a state or an international organization also to take into account in the exercise of its sovereignty, circumstances that occur or have occurred outside its territorial jurisdiction,” said the Environmental Defense Fund in a statement.

International aviation emissions account for 3% of global greenhouse gas discharges, and are only expected to rise, according to the EU.

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