Aviation in the EU ETS

The EU has long argued for the necessity of making aviation contribute to emission reductions globally through technological improvements or by offsetting its growth in emissions through the funding of emission reductions in other sectors, but international consensus on such measures has been elusive. From 1 January 2012 aviation has been included in the EU ETS, the overall principle being that all flights which depart from or arrive in the territory of a Member State are covered.5⁴ Some flights are exempted, including military and police flights and flights performed by small commercial air transport operators. The application of the EU ETS to international flights, that is, those going to or from aerodromes ^{[1] [2] [3] [4]}

outside the Union, has met with massive international criticism based on the fact that operators are required to surrender allowances calculated in the light of the whole of the international flight. This, many countries contend, involves illegal extraterritorial application of EU requirements beyond the borders of the Member States.55

The legality of Directive 2009/29/EC, which included aviation activities in the EU ETS, was addressed by the Court of Justice in a preliminary ruling on issues raised by a US airline lobby group in the High Court of Justice of England and Wales.5⁶ The Court did not find any breach of international treaty law or customary international law. However, the judgment did not include a substantive assessment of the Directive’s compatibility with the Chicago Convention on International Civil Aviation5⁷ or the Kyoto Protocol since, in the first case, the Court found that the EU as such was not bound by the Convention and, in the second case, the Protocol was not ‘unconditional and sufficiently precise’ as to allow persons subject to EU law to rely on it in order to contest the legality of the Directive.5⁸ As to the Directive’s application ratione loci and its consistency with customary international law, the Court found that the sovereignty of third countries was not infringed since the Directive is only applied with respect to aircraft that are physically in the territory of one of the Member States and ‘thus subject on that basis to the unlimited jurisdiction of the European UnionU⁹

The strong international criticism nonetheless led the EU to suspend enforcement of the EU ETS in early 2013 to allow time for the International Civil Aviation Organisation (ICAO) Assembly to reach a global agreement to tackle aviation emissions.^{[5] [6] [7] [8] [9] [10] [11]} The 38th ICAO Assembly decided in the autumn of 2013 to develop by 2016 a proposal for a global scheme of market-based measures capable of being implemented by 2020. In response the EU decided that until December 2016 flights between an aerodrome in the EEA—that is, the EU, Iceland, Lichtenstein, and Norway—and an aerodrome in a country or territory outside the EEA will be excluded from the scope of the EU ETSU (Art 28a.)

Allocation of allowances in the aviation sector is governed by specific rules. The total quantity of allowances to be allocated to aircraft operators is defined as a percentage of historical aviation emissions.^ The total quantity in 2012 was 97 per cent of these historical emissions. For the rest of the third trading period, that is, 2013—20, the total quantity of allowances shall be 95 per cent of the historical aviation emissions multiplied by the number of years in the period. Of these allowances 15 per cent are to be allocated by auctioning while the rest, except for a 3 per cent reserve for later distribution to fast-growing aircraft operators and new entrants, are allocated for free on the basis of benchmark values (Art 3a—d). Aircraft operators may use allowances initially allocated to the aviation sector as well as those allocated to other sectors, whereas operators of installations may only use non-aviation allowances. (Art 12.)

• [1] Joined Cases C-566/11, C-567/11, C-580/11, 0591/11, C-620/11, and C-640/11, Case C-566/11 Iberdrola SA and Others ECLI:EU:C:2013:660.
• [2] 52 Ibid, para 59.
• [3] Conclusions on 2030 Climate and Energy Policy Framework (n 23) 2—3. See also Proposal for aDirective of the European Parliament and of the Council amending Directive 2003/87/EC to enhancecost-effective emission reductions and low-carbon investments (15 July 2015) COM(2015) 337 final.
• [4] 54 Art 3b and Annex I.
• [5] See, eg, the Joint Declaration by twenty-one States, among them Brazil, China, India and theUS, adopted in New Delhi on 30 September 2011. ICAO Working Paper, Inclusion of internationalcivil aviation in the European Union Emissions Trading Scheme (EUETS) and its impact (17 October2011) C-WP/13790, Appendix.
• [6] 56 Case C-366/10 Air Transport Association of America and Others ECLI:EU:C:2011:864.
• [7] (Chicago, 7 December 1944) 15 UNTS 295.
• [8] CaseC-366/10 Air Transport Association (n 56), paras 71 and 78. 59 Ibid, para 125.
• [9] 60 EU Commission—Stopping the clock of ETS and aviation emissions following last week’sInternational Civil Aviation Organisation (ICAO) Council, European Commission—MEMO/12/
• [10] 854 (12 November 2012).
• [11] The same applies with respect to flights between an aerodrome in a so-called outermost region ofthe EU and an aerodrome in another part of the EEA. Regulation (EU) No 421/2014 of the EuropeanParliament and of the Council amending Directive 2003/87/EC establishing a scheme for greenhousegas emission allowance trading within the Community, in view of the implementation by 2020 of aninternational agreement applying a single global market-based measure to international aviation emissions [2014] OJ L 129/1.