Lorand Bartels analyzes the issues for ICTSD here. The abstract:
The following questions are addressed in this paper: is it possible to design a carbon trading scheme that is both administratively feasible and justifiable under WTO law? Does the inclusion of aviation in the EU ETS violate the unconditional most-favoured nation obligation in Article I:1 GATT? Is the scheme exempt from regulation because of the GATS Annex on Air Transport Services? Does the scheme violate the most favoured nation and national treatment obligations under Articles II and XVII GATS? And can the scheme be justified under the environmental exceptions of Article XX GATT and Article XIV GATS, respectively?
And an excerpt from the conclusion:
The foregoing analysis has illustrated the complexities of the WTO aspects of the EU’s aviation scheme, with the result that, except in certain limited cases, any discriminatory effects of the measure are likely to be justified on environmental grounds. However, this analysis has also shown up some more longterm structural issues for the WTO, which are of particular relevance to climate change issues, but not limited to these. One of the more surprising points to emerge from this case study is the fact that a WTO member cannot justify discrimination under the Chapeau to Article XX GATT and Article XIV GATT on the basis that it needs to comply with its international obligations. This rule, which was stated in Brazil – Retreaded Tyres, has one obvious merit, which is to prevent WTO members from seeking to circumvent their WTO obligations by entering into contradictory international agreements. However, it also has less than salutary effects on the coherence of WTO law with the remainder of the international legal system. One wonders whether perhaps another solution might not be found such that WTO members are able to avail themselves fully of the general exceptions in the WTO Agreements while still remaining in compliance with their international obligations.
There is also a comment by Rob Howse.
And here's a working paper on the same subject by Henri Joel Nkuepo:
The EU did not assess the implications for developing and developed countries’ airlines before extending the Emissions Trading System (ETS) to all foreign airlines. It decided to apply the regulation to all airlines flying from and to airports situated in the EU with an exception written in a very technical language. This paper aims to show how the negligence of the EU to assess the implications for developing and developed countries’ airlines contributed in adopting a discriminatory policy and, therefore, constitutes a violation to the World Trade Organization (WTO) discrimination principles. The paper concludes that the EU Directive 2008/101/EC of 19 November 2008, as currently written, can be successfully challenged by developing countries under the WTO law. It does not call on the European Parliament to remove the Directive but to amend it accordingly so that developing and developed countries' airlines benefit equally and inequality not perpetuated.
I tried to think through these issues at one point. I found them impossibly complex, and a small part of me is hoping no litigation ever arises. ;)
