WTO Next Stop for ETS Dispute?

By Geoffrey Thomas | January 10, 2012

Trade experts are warning that regardless of the legal merits of last month’s ruling to include aviation in the Emissions Trading Scheme (ETS) by the Court of Justice of the European Union (CJEU), a trade war looms between the rest of the world and Europe.

Marc Busch, the Karl F. Landegger Professor of International Business Diplomacy at Edmund A. Walsh School of Foreign Service and Professor of Government at Georgetown University, told the Montreal Gazette “while (Europe) may be frustrated with (Montreal's) ICAO, most of its trade partners probably see the underlying spirit as protectionist.”

No matter how laudable Europe's goals may be, Buschsaid, developing countries like India and China will paint the ruling as "typical of Europe's race to the top on standards," it is an elitist and protectionist measure that will harm their developing economies. Busch said the dispute might now be referred to the World Trade Organization.

"For India to be threatening unknown retaliation, for the Chinese to be holding up Airbus purchases and for the US to be entertaining laws that would prohibit US airlines [from complying with the ETS] is really quite politically charged," Busch said.

"And if this case gets to the WTO, the sheer number of participants in the litigation would likely lead to a most awkward ruling. I'd rather this go to the WTO than have India, China and the US all offer retaliatory gestures that could blossom into a broader trade war.

"This is really a hot topic. In a nutshell, it touches so much that makes globalization challenging right now—institutions with overlapping jurisdictions, the European Union pursuing a lofty ambitious goal, and yet moving unilaterally despite the fact that we have an institution [ICAO] that is trying to make progress," Busch said.

Discuss this article 9

10 Jan03:19

I have blogged about this

By Srikar

I have blogged about this here - http://treadthemiddlepath.blogspot.com/2011/12/another-airline-collision... and
http://treadthemiddlepath.blogspot.com/search/label/EU%20ETS

There seems to be ambiguity whether the dispute would fall within the jurisdiction of the WTO regime. This blog piece (http://lincicome.blogspot.com/2012/01/europes-green-airline-war-provides...) mentions why it would not fall under the WTO Agreements.

Only time will tell!

10 Jan04:25

Why should the ETS be

By Question everything

Why should the ETS be collected in Europe particularly for airlines domiciled in a non-European country? Is this just another grab for cash using global CO2 as the reason? Does the WTO have enough will to rule against the EU? Given the current economic problems Europeans cant afford a trade war with China plus India plus USA but who cares anyway? Haven't they brought this on themselves?

11 Jan03:21

The world is facing a very

By Anonymous

The world is facing a very tight 'carbon budget' (i.e. a limit to the total amount of greenhouse gases it can emit from now until 2050) if it wants to avoid dangerous climate change and the associated economic, social and environmental upheavals at the end of this century.

The remarkable past and projected growth of aviation emissions is a big challenge from that perspective as it consumes the already tight carbon budget. To avoid an even worse economic and social crisis resulting from climate change, something needs to be done.

Setting a price for emissions is widely seen as the best way to start reducing them - that is what the EU is attempting to do with its scheme for aviation emissions. It has attempted to negotiate a global agreement since the 1990s - but its efforts have not been successful.

Interestingly, the US has been traditionally the strongest supporter of environmentally motivated trade measures at the WTO (the Tuna-Dolphin and Shrimp-Turtle cases) and the only country that has made a reservation to the related principle in the Rio Declaration of 1992 (i.e. its reservation says that unilateral environmental trade measures are sometimes legal).

The WTO's jurisdiction to consider this case is highly questionable because aviation activities are largely excluded from the ambit of the international trade regime. In any case, the outcome of a possible dispute would depend on law (=WTO Agreements) and not on WTO's 'will' to rule against the EU. There simply does not seem to be a legal basis to do so.

12 Jan08:26

Unlike most other forms of

By Anonymous

Unlike most other forms of transport, power generation etc, aviation has no alternative using current technologies to burning fuel - whether conventional or biofuel, and this is not taken into account enough when comparing carbon emissions. It's also hard to take seriously the voice of Connie Hedegaard and her colleagues when they hold enormous climate conferences in Copenhagen and Cancun where many thousands of people need to travel to attend ( I believe it was 18,000 in Copenhagen)

13 Jan01:54

What will be interesting is

By Anonymous 2

What will be interesting is that WHEN (I delberately don't say 'if' ) the Euro crisis causes countries like Greece and Spain to leave the Euro and revert back to their previous currencies - these countries will be at a hiuge disadvantage as their currencies will be hugely devalued against the Euro. This presumably would mean Olympic/Aegean/Iberia etc could not pay for the carbon credits and will not be able to survive?

16 Jan21:43

The height of arrogance

By steve

The height of arrogance thinking that the EU can control climate change.Its all about "show me the money". Just like Germany's eco tax on flights departing Germany,all these taxes go into the general fund.Europe and the euro are collapsing and this is all but a band aid approach for short term cash infusions.
When vacationing in Europe,I avoid England and Germany as I don't like my pocket being picked.I'll spend my money in italy,spain and other European destinations where my money can be spent on goods and services that I choose and not some bloated government run by overpaid politicians.

23 Jan13:45

Aviation is excluded from the

By Anonymous

Aviation is excluded from the WTO Treaty, so this forum needs to be ruled out. The European system seems pretty legal and fair anyway.

24 Jan21:17

Europe should buy brand new

By Anonymous

Europe should buy brand new airplanes with tax payers money and give it free to all airlines. Don't they want to save the world ? Hipocrites. They destroyed half of the world and now want to pretend they care. Stop all military flights over Europe. That will help.

29 Jan14:41

Typical of Europeans , they

By Monnides

Typical of Europeans , they still believe they rule the world. Good for China that decided to hold any purchases of Airbus planes. That will hurt them since Europe and Airbus are joined at the hip. 10 A-320 is valued more than all the money they will make from this ETS tax.