Editorial Comment

Expert opinion says ETS is legal

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Expert opinion says ETS is legal

The advocate general to the European Court of Justice Juliane Kokott has stated that the European Union’s carbon emissions trading scheme (ETS) which will force non-European airlines to pay for carbon emissions are within the law.

She said: "EU legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law, and is compatible with the relevant international agreements.”

Expect non-EU airline stocks to fall today, even though the opinion at the ECJ is not binding. A final ruling will be made by the court's judges early next year although traditionally they have followed the advice of an advocate general.

The advice is also expected to be adopted by the London High Court of Justice, which referred the case brought by the Air Transport Association of America, American Airlines and United Continental to the ECJ.

This is a relief in many ways. ETS – if implemented incorrectly by the non-elected bureaucrats in Brussels – could forever devalue European airlines operating on the world stage. If the advocate general opinion is not adopted by the court, it could, and should, lead to some airlines, especially cargo airlines, basing themselves in North Africa or even in some cases further afield than that. The EU needs to stick to its guns, be bold or forget the whole thing.

The irony is that if the EU gets it right and ensures that all airlines are included in the ETS, then carbon chip trading can actually earn an airline a very good secondary income. An airline with an older fleet can, if they play the game well, create good revenues. Airlines such as Ryanair on the other hand with young fleets will have to be far more careful and may find themselves trading carbon chips with the big energy companies before too long.

Look out for information later this month on the ETS Forum being held in London during February 2011. Go to www.aerospaceinvestmentconferences.com for more information.