It is well known that the aviation industry is not pleased with the EU Directive integrating all flights departing or landing in the EU, including intercontinental flights into the EU's emissions trading system (ETS). All airlines flying in and out of the EU, including airlines from third countries are required to comply with the EU Directive since 1 January 2012. Under the Directive, all airlines flying in and out of the EU are required to report on their verified CO 2 emissions (2009-2013) by April 2013. Consequently, if airlines refuse to apply Community law they would be subject to sanctions including fines or, as a last resort, a EU flight ban, “in the case of a permanent and constant infringement”. The US as well as Australia, Canada, China, Japan, India, South Korea (including their airlines), even before the directive has been adopted, have shown their opposition to the EU’s ETS.


In fact, the Air Transport Association of America, American Airlines Inc., Continental Airlines Inc. and United Airlines Inc. (collectively ‘ATA and others’), contested the measures transposing Directive 2008/101 in the UK, and brought proceedings against the Secretary of State for Energy and Climate Change before the High Court. They argued that the EU infringed several principles of customary international law and various international agreements, namely the Chicago Convention, the Kyoto Protocol and the Open Skies Agreement because it imposes a form of tax on fuel consumption, as well as certain principles of customary international law as it seeks to apply the allowance trading scheme beyond the European Union’s territorial jurisdiction. The High Court referred the matter to the ECJ, but, last December, the ECJ confirmed the validity of the directive that includes aviation activities in the emissions trading scheme.

Despite the ECJ’s ruling, the US as well other countries such as China and India are not willing to give up their fight to exclude their airlines from the EU's ETS. Tony Tyler, the head of the International Air Transport Association (IATA), whilst warning the EU measures may provoke a trade war, said "Non-European governments see this extra terrestrial tax as an attack on their sovereignty".

China has already banned its airlines from participating in the EU ETS. The US and Russia are also considering prohibiting their airlines to participate in the scheme. In fact, on 21 February the US, China, India, Russia and other 30 countries, the so called “coalition of the unwilling”, held talks in Moscow on potential retaliatory measures against the EU inclusion of airlines in the ETS. They signed a declaration opposing the EU legislation and asked Brussels to suspend it.

It has been reported that Chinese airlines have cancelled and are refusing to finalise orders for Airbus jets in retaliation for the EU’s Emissions Trading System (ETS). According to the EuropeanVoice, Wu Hailong, China's ambassador to the EU stressed, “The ultimate decision right whether to complete an order with Airbus is with the airlines”. But he also said, “This is largely a commercial issue decided by the airlines but of course their decision will be influenced by the view of the government on the ETS.” Moreover, he pointed out that “The issue is too big to be decided by the EU alone.” However, Brussels is not planning to change its position. According to the European Commission’s director-general for climate, Jos Delbeke, the EU would solely suspend the inclusion of aviation in the ETS if there is a global emissions-reduction scheme agreed by the International Civil Aviation Organization (ICAO).

On 9 March the Environment Council debated the opposition, from third countries, to the inclusion of international aviation in the EU's ETS. Obviously, member states want to avoid trade disputes. According to the Council Conclusions “The Commissioner underlined that the European Court of Justice, in its judgment of 21 December 2011 regarding the validity of the ETS Directive, found that the EU scheme was fully compatible with international law.” Martin Lidegaard, Denmark’s climate minister also reiterated the "EU will stick to its own ETS system", if there is no international arrangements on carbon emissions by airlines.

In the meantime, Airbus and several airlines such as British Airways, Virgin Atlantic, Lufthansa, Air France, have written to political leaders, including David Cameron, Angela Merkel and François Fillon, arguing that the inclusion of airlines in the EU's Emissions Trading Scheme (ETS) threatens jobs and trade. The signatories of the letter are particularly concerned about trade-related retaliation by third countries not complying with the ETS. The above-mentioned companies said they “fully expect the list of suspensions, cancellations and punitive actions to grow as other important markets continue to oppose [the] ETS”. Moreover, they noted that Europe couldn’t afford such situation in the present economic climate. According to the BBC, these companies are urging political leaders to pursue a 'compromise solution… which will mitigate third-country concerns whilst protecting the environmental integrity of the EU Emissions Trading Scheme'. They are therefore calling for “a global solution” and for the measures to be suspended until an international agreement is reached.

The EU measures are having a damaging impact on the aviation industry. On the other hand, the aviation industry is likely to pass their costs on to the consumer – therefore airline fares are set to rise. In fact, Lufthansa, Brussels Airlines and Delta AirLines have already included the ETS charge in the price of tickets. Obviously, other airlines will raise ticket prices to compensate for the costs of ETS. It is obvious that such measures will have a negative impact on the competitiveness of member states’ national airlines.