EU court rejects American challenge to CO2 airline tax

AFP - The European Court of Justice threw out Wednesday a case brought by north American airlines against a new EU system charging airlines for carbon emissions.

European Union law "including aviation activities in the EU's emissions trading scheme is valid," said judges in a ruling which tees up US reprisals threatened by Secretary of State Hillary Clinton.

The EU is to include all airlines in its Emissions Trading System (ETS), used to charge industries such as oil refineries, power stations and steel works for CO2 emissions as part of Europe's efforts against climate change.

Furious US, Canadian and other carriers say their inclusion violates international aviation pacts, but the European Commission said following the ruling that the ETS would enter force as scheduled on January 1.

Under the scheme, airlines would have to pay for 15 percent of the polluting rights accorded to them, the figure rising to 18 percent in 2013-2020.

"Application of the emissions trading scheme to aviation infringes neither the principles of customary international law at issue nor the Open Skies Agreement" across the Atlantic, the court decided.

"It is only if the operators of such aircraft choose to operate a commercial air route arriving at or departing from an airport situated in the EU that they are subject to the emissions trading scheme," it added.

As a result of this choice, the EU system "infringes neither the principle of territoriality nor the sovereignty of third states, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the member states of the EU."

UN agency the International Civil Aviation Organization last month urged the EU to exclude foreign carriers from the new rules.

Foreign airlines denounce their inclusion in the ETS as an unfair tax on crossing European airspace.

In a letter to EU officials dated December 16, Clinton listed 43 nations from Argentina to Russia to Venezuela also opposed to the EU move.

"Halt or, at a minimum, delay or suspend application of this directive," she wrote. "Re-engage with the rest of the world.

"The United States stands ready to engage in such an effort. Absent such willingness on the part of the EU, we will be compelled to take appropriate action."

The US House of Representatives passed a bill in October directing the US government to forbid US carriers to take part "in any emissions trading scheme unilaterally established by the European Union."

And underscoring the potential for a signficant trade row, China reportedly retaliated in June by blocking an order by Hong Kong Airlines for billions of euros worth of Airbus aircraft.

The case was originally brought before the High Court in London by the Air Transport Association of America and the US airlines American Airlines, Continental and United Airlines, joined by the International Air Transport Association (IATA) and the National Airlines Council of Canada.

Chinese and Indian airlines had also said they would launch similar cases.

In a statement Tuesday ahead of the ruling, European airlines expressed fears of an imminent trade war should the Commission stick to its guns.

"The real issue is political, not legal," said Ulrich Schulte-Strathaus of the Association of European Airlines (AEA).

"Even if the ECJ decides that the EU ETS conforms with EU law, this will not resolve non-European countries' vehement hostility," a statement said.