AbstractFrom 1 January 2012, all flights departing from or arriving at the European Union are covered by the EU Emissions Trading Scheme (EU ETS). Amendments were made to Directive 2003/87/EC by Directive 2008/101/EC with the objective of reducing climate change impacts attributable to aviation, but also in order to avoid distortions of competition. The scheme now includes all airlines, including those from third countries, and accounts for emissions that occur partly outside the airspace of EU Member States. A large number of third countries claim that the extension of the Emissions Trading Scheme to legs of flights outside EU territory violates the principle of state sovereignty and deny the jurisdiction of the EU to regulate emissions that occur beyond its borders. So far, the validity of the EU regulation has been challenged by a claim brought by US and Canadian air carriers. They contended that, in adopting the Directive, the EU infringed principles of customary international law—in particular the principle of state sovereignty and the prohibition of extraterritorial application—as well as various international agreements. On 21 December 2011, the Court of Justice of the European Union ruled that the inclusion of emissions from aviation in the EU ETS is valid. In response, Chinese and Indian carriers threatened not to pay the charge, while US airlines pledged to consider other options. This chapter analyses the judgment of the Court and the opinion of Advocate General Kokott in this case. Particular attention is given to the question of extraterritorial jurisdiction and the understanding of state sovereignty in the context of global climate change mitigation. The chapter argues that the Court missed an opportunity to contribute to the clarification of the law on jurisdiction and to the development of climate law.
Is the European Union Emissions Trading Scheme (EU ETS) informationally efficient? Evidence from momentum-based trading strategies