The European Court of Justice made a bad situation a little worse yesterday when it upheld a law allowing the European Union to charge international airlines for their carbon emissions. The regulations require all commercial aircraft taking off or landing in 30 European nations to participate in the EU’s emission-trading system, known as ETS. China, India, Russia, the U.S. and at least 22 other countries have protested, correctly in our view, that the ETS represents an inappropriate extraterritorial application of national law. Indeed, starting Jan. 1, airlines will have to account for -- and later, if they exceed certain allowances, pay a penalty on -- emissions produced during the entire length of a journey to and from a destination in Europe, not just those within European airspace. The Air Transport Association, the trade group for the largest U.S. airlines and freight carriers that initially brought the court challenge, says that, for example, only 8.7 percent of the emissions produced by a flight between San Francisco and London will occur in EU airspace, yet the airline will be accountable to the ETS for the full distance. The industry estimates it will cost U.S. companies $3.1 billion to comply with the rule through 2020. (Analysts at our sister operation Bloomberg Government put the cost between $2.1 billion and $4.2 billion depending on the cost of carbon allowances.)
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