COUNCIL OF
THE EUROPEAN UNION

Brussels, 28 October 2011

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NOTE
from :
to :
Subject :

General Secretariat of the Council
Delegations
ICAO – Preparation of the 194th session of the ICAO Council
– Information note on ETS

Following the Coreper meeting on 28 October 2011, delegations will find attached a further revised
version of the above- mentioned information note. Changes with respect to the previous version are
marked with bold and strikethrough.

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ANNEX

INFORMATION NOTE

Coordination in preparation for the 194th session of the ICAO Council
Further to Council Working Document AVIA W. Doc. 2011/97 of 19 October 2011, and in
preparation of the 194th session of the ICAO Council, the services of the Commission recommend
the adoption of an EU position on the items of EU interest indicated below, and on the basis of the
currently available relevant information.

1.

Items in the area of environmental protection
•

European Emissions Trading Scheme (C-WP/13761 Information Paper submitted by the
Secretary General and C-WP/13790 Working Paper submitted by 26 countries
represented on the Council)

This item is scheduled for discussion in the ICAO Council on 2 November. On-the-spot European
coordination meetings will be organised by the ICAO Council Member representing the rotating
presidency of the Council together with the EU Representative to ICAO.

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194th ICAO Council session
Consideration of agenda items of EU interest – suggested Union positions

1.

ITEMS IN THE AREA OF ENVIRONMENTAL PROTECTION
•

European Emissions Trading Scheme (C-WP/13761 Information Paper submitted
by the Secretary General and C-WP/13790 Working Paper submitted by 26 countries
represented on the Council)

Background

On 2 November the ICAO Council will discuss the EU's inclusion of aviation in the EU Emissions
Trading System (EU ETS). The issue was put on the ICAO Council agenda following a request
made in June by South Africa, supported by many other members of the Council. The Secretary
General has submitted a factual information paper describing the EU ETS and summarising ICAO's
work on market-based measures (MBMs) (see C-WP/13761, as attached to Council Working
Document AVIA W. Doc 2011/95). However, discussion will focus on the Working Paper
submitted jointly by 26 states, which inter alia urges the EU and its Member States to refrain from
including flights by non- EU carriers to/from an airport in the territory of an EU Member State in its
emissions trading system (see C-WP/13790, as attached to Council Working Document AVIA W.
Doc 2011/96).

This information note summarises the background to this issue, and proposes an EU position for the
discussion that will take place in the ICAO Council. It also includes in Annex 1 a draft paper for
possible submission to the ICAO Council by the eight EU Member States represented on the
Council, and in Annex 2 a draft statement to be made in the event that the Council should adopt
conclusions to which the EU needs to record its formal objections.

As a prelude to the discussion on 2 November the ICAO Council held an information session on 29
September. The Commission gave a comprehensive presentation on the inclusion of aviation in the
EU ETS. This provided information to the Council on the EU ETS, including on its likely economic
impacts and addressed some of the main concerns that have been expressed by third countries.

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In addition, the presentation made clear that the EU is committed to working within ICAO for a
global agreement, which could either be achieved through agreement for a harmonised global
approach, or through interacting national and regional systems. It also highlighted the need for
ICAO's follow-up work on market based measures to accelerate, in relation to further developing
the framework for market based measures, performing the feasibility study on a global MBM
system, and carrying out more work on medium and long term goals. Finally, it was emphasised
that the EU is open to discussions concerning the exclusion from the EU ETS of incoming flights
on the basis of the provisions in the Directive on third country measures. The legislation gives the
Commission implementing powers for this purpose.

At the same time, on 29-30 September, a meeting was taking place in Delhi to which India had
invited all non- EU members of the ICAO Council, as well as a number of other states. This resulted
in the adoption of the Joint Declaration, signed by 21 States, which is now appended to CWP/13790.

Prospects for the ICAO Council discussion

Given that 26 of the 36 States on the ICAO Council are supporting the positions set out in CWP/13790, it seems inevitable that these positions will be agreed by the Council. We are in
relatively untested legal territory here, but we do not believe that a decision by the ICAO Council
has legally binding effect, as distinct from the specific procedure under Article 84 of the Chicago
Convention for the settlement of disputes with a right of appeal. It is clear however that a decision
adopted by the ICAO Council would constitute an important political statement. If it calls on states
to take certain action, or to refrain from certain action, on the grounds of an incompatibility with the
Chicago Convention, then failure to comply could be used as an element in any subsequent dispute
settlement procedure under Article 84 of the Convention.

For this reason, it will be extremely important that the EU position, including all the arguments
against the line set out in C-WP/13790, is fully articulated during the discussion and thereby
recorded in the minutes.

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While it seems clear that the eight EU Member States (quite possibly together with Australia) will
be in a minority in the discussion, there may be different possibilities for how the outcome is
presented. The most benign outcome foreseeable at this stage would be one, perhaps without a vote,
where the President of the Council is able to conclude that there is broad agreement on a number of
points, but that there remains disagreement on certain other issues, with a large majority of the
Council taking one view and a minority taking a contrary view. The prospects for such an outcome
are likely to be stronger if the EU Member States were to submit a paper of their own to the
meeting. Any such paper should be as constructive, and supportive of ICAO's role, as possible in
order for the President to identify substantial common ground. At the same time it would need to
highlight the main areas where the EU Member States take issue with C-WP/13790. A draft paper
is attached at Annex 1 for consideration.

Alternatively, it seems likely that the 26 States submitting C-WP/13790 will simply push for the
Council to adopt its recommendations. In this case the EU Member States would have to make clear
that they do not support the outcome, or to make clear which parts of the outcome are unacceptable.
In this case, and in any event if a vote is called for, it will be important that a clear statement is
made that can subsequently be included in the minutes of the meeting. For this purpose, a draft
statement is attached at Annex 2.

Observations on C-WP/13790

It should be noted from the outset that there are some elements of C-WP/13790 that can be
supported, as set out in paragraph 7 below, such as its call for action in ICAO on CO2 emissions.
On the other hand, there are a number of critical observations that are worth making, and which
could be usefully deployed during the discussion. These include challenging some of the
unsubstantiated assertions made relating to legal aspects or the interpretation of Resolution A37-19.
The most important such points are the following.

Paragraph 2.2 asserts that the EU ETS violates the principle of state sovereignty laid down in
Article 1 of the Chicago Convention. This assertion must be rejected. Article 1 of the Chicago
Convention recognises that every State has complete and exclusive sovereignty over the airspace
above its territory.

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A State may not therefore perform any act in the territory of another State without the latter's
consent. But the EU ETS has no regulatory effect whatsoever concerning how aircraft fly over the
territory of other states or the high seas. The EU ETS is not extraterritorial since it applies to take
offs and landings in the EU and does not regulate conduct outside the EU. In particular no
enforcement occurs outside the EU. The fact that emissions over entire flights landing at or
departing from the EU are taken into consideration in order to determine aircraft operators'
obligations under the EU ETS is not tantamount to the exercise of sovereignty or regulatory powers
over third countries' airspace. This was the line taken by the Commission, the Council and the
European Parliament together with Member States in the ECJ proceedings, and this was supported
by the Advocate's General opinion on 6 October 2011.

Paragraph 1.5 states that the EU ETS also applies to parts of the flight outside EU airspace. To
respond to this statement it should be recalled that an airspace approach was rejected by the
UNFCCC as early as 1996 and described by ICAO as "impracticable" in 2007. In 1996 the
UNFCCC's Subsidiary Body for Scientific and Technological Advice ("SBSTA") considered eight
options for allocating emissions from international aviation to states and specifically rejected the
airspace based approach. In ICAO, the 2004 Assembly Resolution (A35-5) requested the Council to
provide guidance for use by Contracting States to incorporate emissions from international aviation
into existing emission trading systems. The subsequent guidance on emissions trading (ICAO Doc
98851 ) considered the airspace based approach "impracticable".

Paragraph 2.3 asserts that the EU ETS violates the United Nations Framework Convention on
Climate Change (UNFCCC), but contains no further explanation. It can be expected that the
proponents will state that the grounds for this assertion are that the ETS is incompatible with the
UNFCCC's principle of "common but differentiated responsibilities and respective capabilities"
(CBDR) because it does not distinguish between airlines or routes from developing as compared to
developed countries. The basic response to this is that the principle of CBDR applies to the
measures that States should take in relation to their markets, and does not apply to companies active
in a particular market. Under the Chicago Convention, the basic principle is non-discrimination,
and the EU ETS is fully consistent with this.

1

Guidance on the Use of Emissions Trading for Aviation, ICAO Doc 9885, First edition 2008.

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It is also worth pointing out that the US, in its statement of reservation with regard to Resolution
A37-19, stated that: "in particular we object to paragraph 6(c), which would … unduly differentiate
among ICAO Member States in a manner inconsistent with the Chicago Convention".

Paragraph 2.4 notes that the EU ETS has been implemented without any concurrence of ICAO or of
non-EU Member States. However, as the European States have stated in their reservation against
Resolution A37-19, the Chicago Convention contains no provision which might be construed as
imposing upon the Contracting Parties the obligation to obtain the consent of other Contracting
Parties before applying the market-based measures referred to in Resolution A37-19 to operators of
other States in respect of air services to, from or within their territory. On the contrary, the Chicago
Convention recognises expressly the right of each Contracting Party to apply on a nondiscriminatory basis its own laws and regulations to aircraft of all States.

Paragraph 2.4 also assert that implementation of EU ETS would pre-empt and negate Resolution
A37-19, which requests the ICAO Council to develop a framework for market-based measures for
consideration at the 38th Assembly. However, on the contrary, the Resolution explicitly foresees, in
paragraphs 14 and 17, the possibility that existing market-based measures may be implemented.

Union position

It is important to bear in mind that this ICAO Council meeting will not be decisive, and we should
not therefore over-react to the draft Resolution presented by the opponents of ETS. It is one step in
a process which can be expected to evolve. For example, in the event that an Article 84 procedure
were to be launched subsequently, this would lead to a further process likely involving mediation
and further negotiation. The EU's position at this ICAO Council should be to defend the EU
legislation robustly and calmly, while making clear the EU's commitment to strongly support
making progress in ICAO (this will be a critical element also in the eyes of the leadership of the
ICAO, such as President Kobeh) and our willingness to continue to engage in constructive
discussions with all international partners.

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It is proposed that the position taken by the EU Member State representatives on the Council should
include the following elements:

1.

The critical importance of addressing aviation's climate impacts effectively should be
stressed. This is fundamental to securing for the aviation industry globally its ability to
continue growing.

2.

Full support should be expressed for the role of ICAO in addressing the climate impacts of
international aviation, and for the implementation of Resolution A37-19.

3.

It should be stressed that the EU has acted wholly consistently with ICAO policy, notably in
the following respects:

a.

ICAO decided in 2004 not to pursue any further the development of an aviation-specific
emissions trading system based on a new legal instrument under ICAO auspices.
Instead, it endorsed open emissions trading and the possib ility for States to incorporate
emissions from international aviation into their emissions trading schemes. This is what
the EU has subsequently done.

b.

The EU ETS legislation is fully compatible both with the ICAO guidance on emissions
trading (notwithstanding the evident differences of view over geographical scope), and
with ICAO Assembly Resolution A37-19. The assertion made in C-WP/13790 that the
EU ETS would "pre-empt and negate" Resolution A37-19 should be firmly rejected. In
particular Resolution A37-19 contains:

i.

In paragraph 6(c), explicit recognition that some states may take more ambitious
action prior to 2020, in support of ICAO's collective medium term goal.

ii.

In paragraph 14, explicit recognition that States may implement existing MBMs.

iii.

In the Annex, a set of fifteen guiding principles for the design and implementation
of MBMs, with which the EU ETS is fully consistent.

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4.

It should be recognised that other States and industry have raised legal concerns. The legal
issues are properly matters to be decided ultimately by the courts, and the EU will of course
respect the rule of law. There is an ongoing legal case before the European Court of Justice. It
should be pointed out that the Opinion issued by the Advocate General on 6 October contains
a thorough analysis of all legal issues raised by the claimants, and has concluded that the 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 releva nt international
agreements. At the same time it should be noted that this is not the Court's judgement, which
is still awaited.

5.

The assertion that the inclusion of international aviation in the EU ETS violates the relevant
provisions of the UNFCCC sho uld be rejected. It is incorrect. The EU is taking action as a
group of industrialised countries who recognise their responsibility to act. In any case this
claim relates to the UNFCCC, but not to ICAO.

6.

It must be made absolutely clear that the EU and its Member States are open to discussions
with all third countries on how the flexibility provisions in the Directive can best be exploited.
Specifically, where a third country takes measures to reduce the climate impact of flights to
the EU, the legislatio n gives the European Commission implementing powers that enable it to
exclude these incoming flights from the scope of the ETS. It should be stressed that these
powers apply only to incoming flights. Any other changes to the Directive, including
suspension of its operation by even a very short period, would require the full legislative
process, involving negotiations between and approval by the 27 Member States and the
European Parliament, a process which normally takes two years or more. The Directive as
implemented nationally by all Member States and EEA countries would apply in full in its
current form in the meantime.

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7.

Attention should also be drawn to the fact that the legislation foresees that, in the event of an
international agreement on global measures, the Commission will consider adapting the EU
system accordingly. In this context, it must be made clear that the EU and its Member States
fully support the process of reaching agreement on global measures. At the same time,
Resolution A37-19 clearly does not envisage a moratorium on national or regional measures
pending agreement on global measures.

8.

On the specific action points in C-WP/13790, the EU position should be as follows:
a)

Take note of the implications of inclusion of aviation in the EU ETS with regard to
provisions of the Chicago Convention
-

It should be made clear that, in the view of the EU and its Member States, there is
no incompatibility with the Chicago Convention.

b)

Continue working on the basis of paragraphs 13 and 18 of Resolution A37/19
-

c)

Re-affirm the importance of the role of ICAO in addressing aviation emissions
-

d)

This can be supported.

This can be supported.

Welcome and adopt the Joint Declaration adopted in New Delhi on 30 September 2011
-

It should be made clear that, while there are several parts of the Joint Declaration
which can be agreed, there are others which are not acceptable. Notably,
objections should be expressed to points 5, 6 and 8.

e)

Urge the EU and its Member States to refrain from including flights by non-EU carriers
to/from an airport in the territory of an EU Member State in its emissions trading system
-

It should be made clear that this is unacceptable. Taking this at face value would
discriminate between operators on the grounds of nationality and leave only
flights by EU carriers subject to the ETS. This would seem to be contrary to
Article 11 of the Chicago Convention. It would also lead to significant market
distortions.

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f)

Urge EU and its Member States to work collaboratively with the rest of the international
community to address aviation emissions
-

It should be made clear that the EU and its Member States are fully committed to
working collaboratively with all its international partners, and hopes that other
states share this commitment.

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ANNEX I TO ANNEX

Draft Paper for consideration of the Council when discussing Item No. 25 of the Work
Programme of the Council for the 194th Session ("European Emissions Trading Scheme
(ETS)")

Introduced by the Council Members of Belgium, Denmark France, Germany, Italy, Slovenia,
Spain, and the United Kingdom.

Referring to C-WP/13790 and its Appendix this room document sets out the areas where it is
hoped that agreement between Council Members could be reached. On the other hand it
indicates on which issues and for what reasons the European members of the Council are not
in agreement with what is stated in C-WP/13790. It also underlines areas of flexibility of the
EU ETS in respect of international aviation.

The Council is invited to note these areas of agreement as well as these areas of nonagreement.

1.

Introduction

1.1

The need to address the climate impacts of international aviation is urgent. Not only is it
essential to ensure that aviation contributes effectively to tackling climate change, it is also
fundamental to securing for the aviation industry globally its ability to continue growing.

1.2

European States welcomed the adoption by the 37th Assembly of Resolution A37-19 as an
important step forward. It established a comprehensive framework for limiting or reducing
emissions from international aviation that contrib ute to global climate change, and defined a
programme of further work to be developed within ICAO. This includes the submission of
action plans to ICAO by States, and further work on global goals and measures, notably
market-based measures.

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The Resolution also importantly contains recognition that some States may take more
ambitious actions prior to 2020, and that States are implementing existing market-based
measures. This is important, as global aviation emissions are projected to be around 70%
higher than 2005 levels by 2020. We must consider this significant emissions growth in the
context of last year's Cancun agreement at the UNFCCC conference, where all parties agreed
to an international commitment to "deep cuts in global greenhouse gas emissions" in order to
limit the increase in global average temperature below 2º C. Aviation needs to play a role in
delivering this globally agreed goal.

2.

Areas of agreement

2.1

European States fully support ICAO continuing to undertake efforts to reduce aviation's
contribution to climate change, and agree on the importance of States working collaboratively
in support of that process. European States are taking ambitious and comprehensive actions in
support of the sustainable development of aviation being pursued by Resolution A37-19.

2.2

C-WP/13790 proposes a number of actions to the Council. Some of these actions can be fully
supported. In particular, re-affirming the importance of the role of ICAO in addressing
aviation emissions is to be fully supported. Similarly, it is important to advance work in
ICAO on the basis of paragraphs 13 and 18 of Resolution A37-19.

2.3

C-WP/13790 invites the Council to welcome and adopt the Joint Declaration that was adopted
by a number of states in New Delhi on 30 September 2011. Many of the elements in this Joint
Declaration can be supported: European States share the view that aviation plays an essential
role in economic progress and market access for the world economy and its citizens, and
recognise the importance of sustainable development. European States also welcome the
intention to collaborate in support of operational changes and improvements to air traffic
management and airport systems, and are actively working in this direction through the Single
European Sky and SESAR initiatives.

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Europe is also active in accelerating the development and implementation of low-carbon
aircraft technologies, notably through the Clean Sky Joint Technolo gy Initiative, and has
initiated a process also to accelerate development of sustainable alternative fuels. And Europe
is actively supporting the process of developing an aircraft CO2 standard through participation
in CAEP, including co-rapporteurship of this task.

2.4

It is notable that the Joint Declaration says nothing about progressing work on market based
measures in ICAO. As long ago as 2001, the ICAO Assembly highlighted market-based
measures as being "policy tools that are designed to achieve environmental goals at a lower
cost and in a more flexible manner than traditional regulatory measures” (Resolution A33-7),
and Resolution A37-19 contains many items of further work relating to market-based
measures. European States would welcome this aspect being reflected in the Joint
Declaration.

3.

Areas of non-agreement – reasons - flexibility

3.1

The inclusion of aviation in the EU's Emissions Trading System (EU ETS) is a key element in
Europe's comprehensive approach to addressing aviation's growing greenhouse gas emissions.
It is fully consistent with international law and with ICAO policy.

3.2

It is important to recall that ICAO decided in 2004 not to pursue any further the development
of an aviation-specific emissions trading system based on a new legal instrument under ICAO
auspices. Instead, it endorsed open emissions trading and the possibility for States to
incorporate emissions from international aviation into their emissions trading schemes. This is
what the EU has subsequently done.

3.3

The EU ETS legislation is fully compatible with ICAO Assembly Resolution A37-19. In
particular Resolution A37-19 contains:

i.

In paragraph 6(c), explicit recognition that some states may take more ambitious action
prior to 2020, in support of ICAO's collective medium term goal.

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ii.

In paragraph 14, explicit recognition that States may implement existing MBMs.

iii.

In the Annex, a set of fifteen guiding principles for the design and implementation of
MBMs, with which the EU ETS is fully consistent.

3.4

European States cannot agree to the negative positions expressed in relation to the EU ETS.
C-WP/13790 asserts that the EU ETS violates Article 1 of the Chicago Convention and the
relevant provisions of the United Nations Framework Convention on Climate Change.
European States believe these assertions to be unfounded. The EU's legislation to include
aviation in the EU Emissions Trading System is fully compatible with the provisions and
principles of international law, including the Chicago Convention. In particular it is important
to note that the legislation does not contain any provision contrary to international law, nor
does it infringe the sovereign rights of third countries.

3.5

It is also incorrect to say that the inclusion of international aviation in the EU ETS violates the
relevant provisions of the UNFCCC. The EU is taking action as a group of industrialised
countries who recognise their responsibility to act. In any case this claim relates to the
UNFCCC, and not to ICAO. And the assertion in C-WP/13790 that the EU ETS would "preempt and negate" Resolution A37-19 is also incorrect. As explained in paragraph 6 above,
Resolution A37-19 explicitly recognises that existing market-based measures may be
implemented.

3.6

It must be made clear that EU ETS legislation contains provisions for flexibility. The EU and
its Member States are open to discussions with all third countries on how these flexibility
provisions can best be exploited. Specifically, where a third country takes measures to reduce
the climate impact of flights to the EU, the legislation gives the European Commission
implementing powers that enable it to exclude these incoming flights from the scope of the
EU ETS. It should be stressed that these powers apply only to incoming flights.

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Any other changes to the Directive, including suspension of its operation by even a very short
period, would require the full legislative process, involving negotiations between and
approval by the 27 Member States and the European Parliament, a process which normally
takes two years or more. The Directive as implemented nationally by all Member States and
EEA countries would apply in full in its current form in the meantime.

3.7

The legislation also foresees that, in the event of an international agreement on global
measures, the Commission will consider adapting the EU system accordingly. In this context,
European States reiterate that they fully support the process of reaching agreement on global
measures. Resolution A37-19 clearly does not envisage a moratorium on national or regional
measures pending agreement on global measures.

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ANNEX II TO ANNEX

Draft Statement

It is disappointing that the Council should adopt this decision against the views of all EU
representatives in the Council. The need to address the climate impacts of international aviation is
urgent. European States welcomed the adoption by the 37th Assembly of Resolution A37-19 as an
important step forward. It established a comprehensive framework for limiting or reducing
emissions from international aviation that contribute to global climate change, and defined a
programme of further wo rk to be developed within ICAO. This includes the submission of action
plans to ICAO by States, and also further work on global goals and measures, notably market-based
measures. The Resolution also importantly contains recognition that some States may take more
ambitious actions prior to 2020, and that States are implementing existing market-based measures.

European States fully support ICAO continuing to undertake efforts to reduce aviation's
contribution to climate change, and agree on the importance of States working collaboratively in
support of that process. European States are taking ambitious actions in support of the sustainable
development of aviation being pursued by Resolution A37-19, and it is disappointing that other
States are seeking to discourage these actions from being implemented effectively.

We firmly believe that this Council decision is based on a fundamentally flawed and erroneous
interpretation of the Chicago Convention. We are firmly of the view that the EU's legislation to
include aviation in the EU Emissions Trading System is compatible with the provisions and
principles of international law, including the Chicago Convention. In particular the legislation does
not contain any provision contrary to international law, nor does it infringe any sovereign rights of
third countries.

The European States make this statement in order to fully clarify their position and reserve their
rights with regard to the matters addressed in the Council decision.

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