The ECJ Judgment on the Extensions of the ETS to Aviation: An Economist’s Discontent

Few EU decisions have caused more international outcry than the extension of the EU Emissions Trading System (ETS) to apply to aviation. The directive was legally challenged by US airlines before a UK court, which referred the case to the European Court of Justice (ECJ) for a preliminary ruling concerning the compatibility of the directive with international law. This paper discusses the argumentation by the ECJ and the Advocate General from an economic perspective. Such an analysis is warranted in light of the fact that the contested measure is an economic regulation, the international laws that are invoked have clear economic objectives, and the ECJ judgment and the opinion by the Advocate General at least partly rely on economic concepts and mechanisms. An economic analysis also seems warranted from a legal point of view since the quality of the judgment and of the opinion presumably depend on the soundness of their economic reasoning. It is found that the argumentation by the legal authorities is highly questionable in important parts, when viewed from an economic perspective.