Tuesday, June 14, 2011

AEA Attacks ETS

Ulrich Schulte-Strathaus, Secretary General of the Association of European Airlines, issued a strongly worded rejoinder in today's Financial Times in response to the paper's June 7 editorial supporting the expansion of the European Union's Emissions Trading Scheme to aviation.  See Ulrich Shulte-Strathaus, Airlines' Concerns Over EU ETS, Fin. Times, June 14, 2011 (available here).  According to Schulte-Strathaus, the ETS will cost EU airlines approximately 3.5 billion euro per year and that the revenues captured from the plan to auction a percentage of the airlines' carbon allowances won't be reinvested to mitigate climate change.  Also of concern to the EU airlines are the tensions the ETS plan is creating with foreign countries. 

The United States and China have been vocal in their objection to the application of the ETS to their respective air carriers.  Though neither has committed to a concrete course of action thus far, both States have indicated that they may seek retaliatory measures against EU airlines unless the Union is willing to limit the scope of the ETS.  Several U.S. airlines, acting in concert with the Air Transport Association, are attempting to challenge the legality of the ETS regulation before the European Court of Justice.  If that action fails, there will be considerable preassure on the U.S. Government to take strong action to protect the commercial interests of American carriers, up to and including revoking the market access privileges of EU airlines.  The result could be a financially destructive trade war that unravels the manifest consumer benefits of the landmark 2007 U.S./EU Air Transport Agreement.  Moreover, China--which has long resisted any encroachment on its sovereignty--could take similar action.  If so, Europe's airlines will find themselves facing economic bombardment on two fronts--battles from which they won't escape unscathed.


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