The Inclusion of Shipping in the EU Emission Trading Scheme: A Legal Analysis in the light of Public International Law

Autor:Daniel Perez Rodriguez
Càrrec:Ph.D. Candidate. Universitat Pompeu Fabra

After regulating Greenhouse Gas emissions from air transport, the European Union is now contemplating taking action on emissions from the shipping sector. In order to do so, the European Commission carried out a public consultation process between January and April 2012. This article analyses the legal problems that would arise, in the light of Public International Law, should the European Union... (ver resumen completo)


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I Introduction

Since January 2012 carbon dioxide emissions delivered by commercial flights taking off or landing at European airports are covered by the European Emissions Trading Scheme.2This decision, the legality of which has been accepted by the Court of Justice of the European Union,3has created major controversies between the European Union and its main trade partners,4notably in relation to the inclusion in the system of non-

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European airlines. This division has also extended among scholars, who are now involved in widespread debate.5

The "carbon war" could soon spread to include the battlefield of shipping, since the European Union intends to regulate carbon emissions from ships in a similar way.6If

this option were to be enacted, it would constitute another major step in EU climate policy because greenhouse gas (GHG hereinafter) emissions from ships represent 3.3% of global carbon emissions.7Throughout this article, the goal is to analyse the legality of the potential inclusion of GHG emissions from ships in the European Emission Trading Scheme.

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II The current european regime

The EU has globally committed to reduce its carbon emissions by 20% or more in 2020.8As far as shipping is concerned, back in 2003 the European Commission was supposed to regulate carbon emissions if no action was adopted internationally by the end of that year.9However, no legislative measures were taken.

Nowadays, several provisions provide for a new mandate to the EU to regulate emissions from ships in 2013 if no international agreement is reached.10This time, it is expected that legislation will come into force.11In addition, the 2011 White Paper on Transport states that shipping emissions need to be reduced by at least 40% in 2050.12

Since no international agreement was made either at the Durban Conference of the Parties (COP thereinafter) 17 or by the International Maritime Organization (IMO), the European Commission opened a consultation process on 19 January 2012, which was closed on 12 April 2012,13in an attempt to explore different ways of regulating carbon emissions from ships. In particular, four policy options were considered: a compensation fund, inclusion in the EU Emissions Trading Scheme, a fuel or carbon tax and a mandatory emissions reduction for every ship. Not surprisingly, countries like China are already opposing any unilateral action the EU may take.14

In February 2012 the Economic and Financial Affairs Council (ECOFIN) invited "the Commission to prepare a reflection paper by June (2012) on the carbon pricing of global aviation and maritime transportation"15, which draws the conclusion that the Emission Trading Scheme (ETS hereinafter) option could be the one that EU

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institutions have in mind, although the final decision does not seem to have been made yet.16

Several international provisions could clash with the inclusion of shipping in the EU ETS. They will be analysed in turn, following a three-step approach. First, the international provisions will be identified. Second, the question of enforceability will be addressed. Thirdly, the legality of the European measure will be examined in relation to international norms.

III United Nations framework convention on climate change (unfccc) and the kyoto protocol
1. International commitments

An international agreement on emissions from ships and airplanes was not reached when the Kyoto Protocol was negotiated. It was during the Copenhagen Summit of 2009 that the possibility of regulating emissions from ships was at last extensively discussed.17The EU proposed a 20% reduction in emissions from ships for 2020 in relation to 2005 levels.18Nevertheless, an agreement was not concluded, since the US and some developing countries strongly opposed any numerical compromise.

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The issue was again discussed in Cancun COP 16, but no agreement on shipping emissions was reached either,19although a draft regulation was provided for in the chair’s proposal20and in later drafts.21In Durban COP 17, NGOs proposed - and the International Chamber of Shipping agreed - to use the revenues obtained by taxing global shipping emissions to establish the Green Climate Fund agreed in COP 16.22The parties welcomed the developments made by IMO - notably, the Energy Efficiency Design Index (EEDI) and Ship Energy Efficiency Management Plan (SEEMP) - but, even though the EU tried hard,23nothing specific in relation to funding was agreed because of opposition from the US and India.

As a result, the Kyoto Protocol does not apply to either air or maritime transport. It only states that greenhouse gases from these two means of transport shall be limited in an agreement between the International Civil Aviation Organization (ICAO) and IMO.24

The United Nations Convention on Climate Change (UNFCCC) applies to all sectors that deliverg greenhouse carbon emissions, including transport.25However, no specific obligations are provided for in the Convention in relation to emissions from transport.

In conclusion, only two general international commitments stemming from the UNFCC/Kyoto obligations could conflict with the inclusion of shipping in the EU ETS:

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the common but differentiated responsibilities principle26(CBDR) and article 2(2) of the Kyoto Protocol.

2. Enforcement

There are three requirements that an international provision needs to fulfil in order to be a criterion for validity of EU law: the EU must be bound by it, the nature and the logic of the agreement must not preclude direct effect and the specific provision needs to be precise, clear and unconditional.

When it comes to the first condition, the Court of Justice (CJ or CJEU) made clear in the ATAA Case that the Kyoto Protocol, in so far as it has been ratified by the European Union,27"forms an integral part of EU law"28and is binding upon the Union." However, the other two requirements for direct effect of the Kyoto Protocol are not met.

First, the CJ considered that two factors preclude the direct effect of the Kyoto Protocol: the flexibility of the emission reduction commitments and the fact that the conference of the parties had imposed non-compliance mechanisms.29Second, the relevant provision, article 2(2), is not worded in sufficiently clear, precise and unconditional terms, so it cannot be directly effective.30As a consequence of the non-fulfilment of these conditions, the Kyoto Protocol cannot be enforced before the CJEU in order to seek a declaration of invalidity of an EU internal law provision.31In the ATAA case, even if the Kyoto Protocol had been deemed to be directly effective, there was another burden to

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overcome, which was the fact that some of the individuals invoking it were US companies, whose country is not a party to the Kyoto Protocol.32

With regards to the UNFCCC, and in particular, the principle of common but differentiated responsibilities, there is no doubt that it also constitutes a part of EU law,33but it is likely that its nature precluded direct effect, since it is formulated in even less concrete terms than the Kyoto Protocol, there are no strict enforcement mechanisms and the commitments undertaken by the Parties are flexible. Even though the CJEU did not address the issue of the direct effect of UNFCCC, since the principle of Common But Differentiated Responsibilities was not raised, Advocate General Kokkott seems to suggest a negative answer in her Opinion in the ATTAA case:

"Neither the [United Nations] Framework Convention [on Climate Change] nor the Kyoto Protocol contains specific provisions that could directly affect the legal status of an individual. There are no more than a few general references to ‘humankind’ and ‘humans’ in these legal instruments."34

Nevertheless, even if as a matter of EU law the Kyoto Protocol cannot render secondary law void, the EU is still internationally bound by that international agreement35and it is relevant, at least from a theoretical point of view, to see whether the EU is in breach of UNFCCC and the Kyoto Protocol. As the CJEU stated in Racke:

"The rules invoked (...) form an exception to the pacta sunt servanda principle, which constitutes a fundamental principle of any legal order and, in particular, the international legal order. Applied to international law, that principle requires that

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every treaty be binding upon the parties to it and be performed by them in good faith."36

Although very unlikely, the EU could accept the arbitration procedure provided for in UNFCCC37or Member States could submit the dispute to the International Court of Justice.38

3. Legality of the EU measure
3.1. The CBDR principle

This principle obliges developed countries to lead the fight against climate change, since "the largest historical share of historical and current global greenhouse gases has originated in developed countries."39Even if it is...

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