The legal risks of stopping the clock on the EU ETS aviation scheme

Past Monday, Commissioner Hedegaard announced that she requested the EU Member States to suspend the application of the Emissions Trading Scheme to the aviation sector pending new impetus that might be given by the ICAO Council to find a multilateral solution to combating climate change in the aviation sector. Hedegaard announced that  ‘in order to create a positive atmosphere around these very important negotiations, I have just recommended in a telephone conference with 27 member states that the EU stops the clock when it comes to enforcement of aviation into the Emissions Trading System (ETS) to and from non-European countries until after the ICAO assembly next autumn.’

This is the latest development in the ongoing saga concerning the inclusion of aviation into the European scheme. The international protest has been growing the past year especially since last years ATA-judgment of the CJEU, with many of the EU’s main trading partners having threatened to take retaliatory measures against the EU for applying their scheme to third country carriers. This heterogeneous group, dubbed ‘the coalition of the unwilling’, has vowed to combat the EU ETS within the ICAO until it has been removed. Today, the Republican dominated US House of Representatives passed a bill making it illegal for US air transport undertakings to comply with the EU ETS.

While the renewed spirit to reach an agreement on the reduction of greenhouse gas emissions within ICAO is to be lauded (although I am a bit skeptical about ICAO’s commitment towards combating climate change), the EU suspension of its legislation raises many legal questions. After all, the EU legal order is based on the rule of law which obliges the EU institutions to follow the appropriate procedures when enacting, repealing and amending legislation. In that respect I wish to submit a number of preliminary doubts as to the legal feasibility of this extraordinary request by  Commissioner Hedegaard.

Directive 2008/101/EC

As part of its international commitments under the Kyoto Protocol and its constitutional mandate to combat climate change, the EU adopted Directive 2008/101/EC, by which the scope of the EU ETS, enacted by Directive 2003/87/EC, was extended to include the air transport sector.  Under the EU ETS, aircraft operators surrender allowances to cover their greenhouse gas emissions. What makes the inclusion of aviation into the EU ETS controversial is the fact that the emissions are calculated over the full length of the flight to and from the EU territory, including those outside the EU air space.  The operators are required to monitor and report their emissions every year by the 31st of March, at which time the amount of allowances that need to be surrendered are known. Operators have one month to comply or surrender sufficient allowances to cover their annual emissions.

The Directive does not give the Commission the authority, either through delegation or through comitology, to suspend the application of the Directive (especially the obligation of the part of Member State authorities to issue fines in cases of non-compliance) in order to reach a global agreement on combating climate change in the air transport sector. In that respect, article 25a (2) of the Directive explicitly states:

The Community and its Member States shall continue to seek an agreement on global measures to reduce greenhouse gas emissions from aviation. In the light of any such agreement, the Commission shall consider whether amendments to this Directive as it applies to aircraft operators are necessary.

The statements made in the Commission’s press release are therefore somewhat puzzling. The release states:

‘As a gesture of good faith the EU will “stop the clock” on the implementation of the international aspects of its ETS aviation by deferring the obligation to surrender emissions allowances from air traffic to and from the EU by one year. This means that the EU would not require allowances to be surrendered in April 2013 for emissions from such flights during the whole of 2012. The monitoring and reporting obligations will also be deferred for such flights. The obligations relating to all operators’ activities within EU will remain intact and compliance with the EU law will be enforced in this respect.’

There are thus two possible options for the Commission to suspend the application of the Directive. The Commission can:

  •  seek to amend the Directive before March 31st 2013;
  • make an informal request to ignore the mandatory requirements imposed by the Directive.

Amending Directive 2008/101/EC

In my opinion, this is the only legal way of living up to the promise made to ICAO members to suspend the application of the Directive for one year. This would require the Commission to send a proposal to amend the Directive to the European Parliament and the Council following the ordinary legislative procedure in accordance with article 192 TFEU.  Considering the fact that the deadline for handing in the monitoring reports by aircraft operators is rapidly approaching (March 31st), this would require swift and decisive action by the Commission, Council and European Parliament. Effective lobbying by environmental organizations and other concerned European citizens might make this difficult to achieve. Also, since it would be an amendment to a Directive Member States would be given very short notice to amend their national legislation accordingly. The risk of not being able to meet the March 2013 deadline or the inconsistent application of the Directive cannot be disregarded entirely.

What is more, the ICAO can only take decisive action in the autumn of next year while the EU will have to suspend the application of the Directive before that. It would thus lose its carrots  and sticks in the negotiations.

The informal request

To my knowledge a request made by the Commission– the guardian of the Treaties –  to not implement an EU Directive is entirely without precedent and the complete opposite of its routine of starting infringement procedures against Member States that do not comply with EU law. There might be the  risk of non-compliance with such an informal request by Member States who wish to abide by the EU ETS resulting is a serious distortion of the EU internal air transport market. Moreover, Member States may face proceedings by private litigants demanding compliance with the Directive.

On the other hand, the duty of loyalty in the field of external relations, requires Member States not to do anything that might jeopardize the outcome of negotiations between the EU and other parties even in fields of shared competence. As the Court held in C-246/07 Commission v. Sweden

the adoption of a decision authorising the Commission to negotiate a multilateral agreement on behalf of the Community marks the start of a concerted Community action at international level and requires for that purpose, if not a duty of abstention on the part of the Member States, at the very least a duty of close cooperation between the latter and the Community institutions in order to facilitate the achievement of the Community tasks and to ensure the coherence and consistency of the action and its international representation.

Of course the Commission only enjoys observer status within the ICAO and I am not aware that any negotiating instructions have been issued. Nonetheless, even if Member States are under an obligation to abstain from taking measures in order to enhance a multilateral agreement to which the EU may become part, this would entail some very problematic legal issues. Can this duty really entail that Member States are to ignore their obligations under a Directive? It seems that the EU Member States are put in a catch 22 situation here: either comply with an EU directive and jeopardize the outcome of negotiations with the ICAO or infringe EU law by not implementing the directive. What distinguishes this situation from other cases of course is that in this case the unilateral action by a Member State consists of complying with EU law.  That makes it doubtful as to whether one could rely on the duty of loyalty enshrined in article 4 (3) TEU, since the Member States are also under a duty to implement the Directive correctly.

Also, if the EU is to take itself seriously as a legal order bound by the rule of law, it should at least follow the appropriate procedures if it wishes to repeal or amend a directive. A suspension of the kind here would seriously jeopardize the prerogatives of the European Parliament, which should in any event be involved in a suspension of a piece of legislation passed by it. We will have to see how things turn out.

 

5 comments

  1. Daniel Pérez

    And the main question is: does this decision to suspend the application of the EU ETS to aviation solve the problem of avoiding conflict and not forcing the EU to fine Chinese and Indian airlines? No, it does not, becasue domestic flights operated by Chinese or Indian companies will still be included under the EU ETS. Will the EU fine those companies, which have not monitored their emissions and are not likely to surrender allowances by April 2013? The same problem is still there. I am convinced that the EU is making a huge mistkae. On the other hand, with regards to implementation, the correct way should be to modify the Directive by the ordinary legislative procedure and where it says 2013, write “2014 if no emission trading measures at international level were agreed”.. If the obligation were removed completely, agreement in the future to re-enact the application of the EU ETS to international flights will not be granted, and it is certain that no serious agreement will be reached at international level (see the case of shipping, where China and Brazil voted last year against the modest SEEMP and EEDi)

    • Laurens Ankersmit

      It’s only for one year indeed. It’s to create ‘a positive atmosphere’ for the upcoming GA in the ICAO next autumn. Hedegaard stated:

      ‘In order create a positive atmosphere around these negotiations, I’ve just recommended in a telephone conference with the 27 Member States that the EU “stops the clock” when it comes to enforcement of the inclusion of aviation in the EU ETS to and from non-European countries until after the ICAO General Assembly next autumn.

      But let me be very clear: if this exercise does not deliver – and I hope it does, then needless to say we are back to where we are today with the EU ETS. Automatically.’

      I don’t know if the EU is making a huge mistake. Cosidering the complete lack of movement within the ICAO over the past 15 years, I think it is perfectly legitimate for the EU to take action. And the Directive gives third countries lots of opportunities to take responsibility too.

  2. Daniel Pérez

    Sorry if I was not clear enough. By making a mistake I meant the decision of suspending for one year the application of EU ETS to international flights, not the decision of enacting the EU ETS for air transport at first, which I think it is a necessary step to fight climate change. With the suspension, the EU shows weakness but at the same time it does not avoid the problem of fining Chinese airlines and even forbidding them form flying within the EU.

  3. Daniel Pérez

    With regards to the way the EU will enact this suspension, it seems that it is not clear yet. I agree with you that asking the States not to implement a Directive could create a bad precedent.

    According to the last news I have read, they could be thinking of just modifying the Directive through ordinary legislative process:

    “The details of how the pause in the application of the EU ETS will be administered at a technical level remain to be clarified, and the proposal still needs to go through the co-decision process with the EU States and Parliament. ” (http://www.travelagentcentral.com/government-regulations/airlines-praise-eu-emissions-trading-scheme-delay-37916)

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