As of January 1, the world's airline industry will have to participate in Europe's carbon trading program, because the law was just upheld by Europe's highest court.

The Court of Justice of the European Union affirmed the EU Aviation Directive is fully compliant with international law.

"Today's decision, from the highest court in the European Union, makes clear Europe's innovative law to reduce emissions from international flights is fully consistent with international law, and does not infringe on the sovereignty of other nations," says a transAtlantic coalition of environmental groups who were defenders in the lawsuit.

The law requires airlines to buy emissions permits when they fly into or out of Europe's airports, and was challenged by US airlines in court.

The lawsuit was filed by United/Continental and American, and trade association, Air Transport Association of America (now Airlines for America). They say they are reviewing further legal options, but meanwhile will "comply under protest."

Airlines initially would be required to pay for only 15 percent of the carbon they emit and would be allocated free allowances to cover the other 85 percent. If they exceed their allotted limits, they will pay penalties.

Those that reduce emissions below the cap can sell permits to more polluting companies. Proceeds are distributed to EU member states, which use the revenues to address climate change.

The cap-and-trade program, which has been operating for six years, covers many industries. The airline industry is the latest to be included - the largest industry after power plants - and is expected to raise ticket prices by $11-57 round-trip, depending on how far they exceed pollution limits.

The fee is about the same amount US airlines currently charge to carry luggage that exceed weight limits.

US airlines want to be exempt from the rules, and the Obama Administration has negotiated on their behalf, saying it should only apply to European airlines. Chinese airlines have also expressed opposition.

In October, the US House passed a bill that would make it illegal for US airlines to comply with the law.

The industry is one of the fastest-growing sources of greenhouse gases - having doubled emissions over the past 20 years.

In the U.S., the Environmental Protection Agency (EPA) is proposing new air pollution standards for large aircraft engines, and greenhouse gas regulations could be on the way.

Airlines say they'd prefer a global approach to regulating emissions, and the International Civil Aviation Organization plans to create a global carbon market for the airline industry, which would supercede the EU program in 2014-2015.

The EU says it fully agrees with that approach, but is tired of waiting for a worldwide solution.

"We hope the focus will now shift away from obstructing its progress on the eve of its introduction and examine how such regional initiatives can form the building blocks of a global agreement," says Tim Johnson, Director of the Aviation Environment Federation.

"US aircraft emissions account for nearly half of worldwide carbon dioxide from aircraft; that amount is expected to triple by mid-century. But the US airline industry has fought to avoid playing its part in preventing runaway climate change. With US airlines shirking their duty, Europe has had to take the lead. The airline industry should now pressure the US government to level the playing field by imposing equivalent restrictions on aircraft pollution in the United States," says Martin Wagner, Managing Attorney at Earthjustice.

US airlines have been preparing to comply with the EU system, calculating flight emissions to establish a baseline, for example. They've been buying more efficient planes and testing biofuels. In August, President Obama announced a $510 million public-private partnership to produce advanced drop-in aviation and marine biofuels.

Photo by Luis Argerich/flickr/Creative Commons