News of the EU ETS impact on the aviation sector is back again. With time for submitting data on emissions running out, the EU is preparing to initiate action for non-compliance. China, which has opposed the coverage of the aviation sector in the EU ETS, has issued a veiled threat of impounding EU airlines in China which has been reported here, here, here and here. A tit for tat?
We are seeing increasing instances of a tit for tat situation in world trade: the string of US China trade disputes, Spanish biodiesel Ministerial order in response to Argenitina's nationalisation of its biggest oil company which had a majority Spanish stake as well as India US trade tensions with respect to poultry restrictions and US visa fee hike issue.
Are we going to see more of these retaliatory domestic measures? What signal does this give to the multilateral dispute resolution system of the WTO? Is this an indication that domestic retaliatory measures are preferred as a negotiating tool rather than adjudicating a violation in the dispute settlement system? Does it indicate the real political economy of trade where decisions are not taken purely on the basis of international law but international politics? Signs of a compromise were reported here between ICAO and the EU regarding a globally accepted emission trading system. Will it ultimately be a retaliatory path or one of compromise, only time will tell.
The resistance to the EU ETS is not only from China. In the U.S. there are moves to enact a legislation that ensures non-compliance with the EU ETS for aviation. The Bill titled the "European Union Emissions Trading Scheme Prohibition Act of 2011"prohibits civilian aircraft of the U.S. from participating in the EU ETS scheme. Would it spark off a trade war between the U.S. and the EU? This provocative post in the Lenz Blog suggests that a trade war, after all, is good for the climate as there will be less flights landing and taking off!