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The trade group representing the largest U.S. airlines has called on the Obama administration to launch legal action against the European Union in a bid to end the bloc's controversial carbon-trading market.
The Airlines for America lobby group dropped its own lawsuit against the EU and called on the Obama administration to bring a case through the International Civil Aviation Organisation, or ICAO, a branch of the United Nations.
The move came as the EU commissioner for climate action, Connie Hedegaard, arrived in Washington for talks with government and airline officials amid an escalating diplomatic row between the bloc and its biggest trading partners.
The U.S. has said it will take "appropriate action" if the EU continues the scheme, while other nations are said to have already started retaliatory measures, with Airbus maintaining China is holding up billions of dollars in aircraft deals. Chinese authorities have not confirmed the move, but like a number of other nations have raised the potential for retaliation.
"The U.S. has been very clear in its opposition," said Nancy Young, vice president for environmental affairs at Airlines for America.
"We think the most appropriate action is a challenge under Article 84 of the Chicago Convention," she said in an interview.
The 1944 convention lays down many of the ground rules for the international airline industry, including restrictions on what governments can do to impact airlines in other countries.
Opponents of the EU's carbon-dioxide Emissions Trading System, which was extended to include airlines on Jan. 1., maintain it over-reaches the bloc's authority by imposing costs on international carriers.
It requires all airlines to buy permits to cover CO2 emitted by aircraft landing and taking off from airports in the region, including those on international flights.
The ETS is the central plank of EU's environmental policy, which is focused on putting a price on carbon-dioxide emissions and capping their number. It aims to encourage companies to invest in clean technologies to reduce emissions in the long term, rather than buying more permits to emit more carbon dioxide. An allowance traded on the ETS gives the holder the right to emit one metric ton of carbon dioxide.
The EU has said it has no plans to suspend the ETS for airlines, though Hedegaard wrote to U.S. Secretary of State Hilary Clinton earlier this year saying the bloc remains open to exempting U.S. carriers if they become subject to other measures that reduce emissions.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135; email@example.com