The most likely solution to the battle over ETS lies in political compromise, according to Mehran Massih, counsel and head of the London-based environment practice at international law firm Shearman & Sterling. He views the European Court of Justice (ECJ) advocate general’s preliminary legal opinion as a wholesale rejection of the Air Transport Association case. In about 90 percent of cases, the final ECJ judgment supports the preliminary opinion.

Massih pointed out that there is clear legal precedent for states to impose regulations on moving vessels coming into their territory. For example, the U.S. government itself regulates pollution from ships that started their voyages outside its waters.

“The reason aviation has reached fever pitch [over ETS] is that it fits into the wider controversy over climate change,” Massih told AIN. “What is possible is that the various parties to this controversy will come to the table to discuss an alternative solution. The issue is as much geopolitical as it is legal.”

The context for a possible settlement might be the discussions that are due to take place about a year from now over the future of the Kyoto Protocol (on curbing greenhouse gases). These talks will decide whether a global treaty to curb gases after 2012 can be agreed. The same states that oppose ETS tend to take the view that Kyoto is an inappropriate structure for addressing this issue. However, Massih pointed out that no global programs for reducing greenhouse gases have emerged as an alternative to either Kyoto or ETS. The EU has always argued that ETS enforcement is critical if Europe is to meet its Kyoto commitments and has said that the failure of the International Civil Aviation Organization to agree bilateral measures has forced its unilateral approach.

The enforcement timetable for ETS might yet allow time for compromise. Operators will have until April 2013 to submit the necessary credits to cover CO2 emitted during 2012, although they would have to comply with monitoring, reporting and verification requirements before then. If a political settlement can be reached in the context of new discussions over the Kyoto Protocol there might yet be a chance to walk away from the full-blown trade war that some say could be provoked by ETS.