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Hillary Clinton steps into EU ETS dispute

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With less than two days to go before the contentious European Union airline emissions tax is activated, it looks almost certain that carriers around the world, despite all the late-year ballyhoo, will start their 2012 operations coughing up the new fees.

Earlier this month, the European Court of Justice, as expected, rejected the argument that the EU emissions trading scheme (ETS) infringes on the sovereignty of non-EU nations. The court also said the EU was not bound by the Chicago Convention.

Although the protests have continued, there's been no public sign of progress towards ending the stalemate since that Dec. 21 legal decision.

But a letter from US Secretary of State Hillary Clinton sent to her counterpart at the European Commission, Catherine Ashton, Dec. 16 has been leaked to the Financial Times and appears to set the stage for an escalation of political intervention in the new year. While not giving specifics, Clinton warns that the US government will be "compelled to take appropriate action" if ETS application to US carriers is not removed.

For now, the safe bet is that airlines will stump up the fees rather than risk far more costly non-compliance penalties, meanwhile hoping that the political heat will ratchet up to the point that the EC is forced to strike a new, internationally-agreed deal on emissions fees.

Thus far, however, the EC has refused to blink. And while US Congress has expressed outrage at EU ETS -- and the House has passed a bill that would make it illegal for US carriers to comply -- America's political system crumbled to new depths of dysfunction this year and has far more pressing domestic crises to deal with in 2012, as well as a presidential election.

It will be interesting, therefore, to see whether Clinton's letter is a genuine shot across the bow that precedes an ugly international fight if not heeded; or whether it was merely a diplomatic show of support before leaving airlines and their representative trade organizations on their own to sort it out.

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