EU's Emissions Trading System

The European Commission for Climate Action explain ETS as follow:

EU’s emissions trading system/scheme! was launched in 2005 and it works on the "cap and trade" principle; which means a limit on the total amount of certain greenhouse gases that can be emitted. The way this scheme works is that companies will receive emission allowances which they can sell to or buy from one another as needed. At the end of each year, each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.The number of allowances is reduced over time so that total emissions fall. The ETS now operates in 30 countries (the 27 EU Member States plus Iceland, Liechtenstein and Norway). Airlines will join the scheme in 2012. The EU ETS will be further expanded to the petrochemicals, ammonia and aluminium industries and to additional gases in 2013.

The ETS conflict between the U.S. and EU is very serious and concerning. Testifying before the House Transportation and Infrastructure Subcommittee on Aviation, ATA Vice President of Environmental Affairs Nancy Young shared this concern with members of the House of Representatives. “The EU ETS violates international law, including the sovereignty of the United States and imposes an illegal, exorbitant and counterproductive tax on U.S. citizens, diverting U.S. dollars and threatening thousands upon thousands of jobs.”In addition to that, ATA projections estimate that the ETS could cost U.S. airlines more than $3.1 billion from 2012 to 2020, a figure that could sustain more than 39,200 aviation jobs. Simply just these two statements alone do tell the potential impact to the US aviation industry if US carriers are forced to participate in this scheme.

Currently, it is unclear whether non-carriers such as U.S. corporate operators will have to participate in the EU's emissions trading scheme. Based on my understanding of reading the EU's ETS on the European Commission for Climate Action website, I think it is quite clear that this scheme is going to include non-carriers and definitely freight carriers such as UPS, FedEx and DHL.

From an enviromental perspective, this scheme seems like at a positive step forward; but, from an economical and legal perspective, I think the EU's emission trading scheme is unfair and illegal because it is regulated and ran by the Europeans alone instead of an international regulatory body that would act as a neutral regulator. This scheme tend to negatively impact most airlines and manufacturers that do business in Europe because it trims their bottom-line and make them less competitive in the global market. If U.S. carriers are required to participate, then the U.S. government should counter-tax European air carriers that fly into the U.S. and use it to subsidize the impacted U.S. airlines and/or companies.