In a 41-page judgement, the European Court of Justice (ECJ) has rejected a legal challenge of the European Union plan to include all flights landing or departing within the EU in its emissions trading system (ETS).

In a statement announcing the ruling, the Court, reflecting in large part the advocate general opinion issued earlier, said that “the uniform application of the scheme to all flights which depart from or arrive at a European airport is consistent with the provisions of the Open Skies Agreement designed to prohibit discriminatory treatment between American and European operators.”

The ruling will anger not just the U.S. and Canadian airlines that originally brought the challenge in a U.K. court, but China, Russia, India and others opposed to their airlines being included in the ETS starting January 1.

Backers of the system are urging those opposed not to act rashly, because airlines will not actually have to deliver permits (or buy carbon credits) until 2013. The bill on the first year’s emissions is not due until April 2013. That leaves plenty of time to talk, an EU representative says.

But action could come sooner rather than later. In the U.S., for instance, the Transportation Secretary already has authority to retaliate and does not even have to wait for the legislation now making its way through Congress on forcing airlines not to comply. The U.S. reinforced its opposition to the EU move on the eve of the ruling. Options include imposing penalties or limiting traffic rights for EU carriers.

As to the issue of forcing airlines to pay for emissions outside EU airspace, the court argues that “the fact that certain matters contributing to the pollution of the air, sea or land territory of the [EU member states] originate in an event which occurs partly outside that territory is not such as to call into question, in the light of the principles of customary international law capable of being relied upon, the full applicability of EU law in that territory.”

Some of the other points the ECJ make in its ruling include:

- the EU is not bound by the Chicago Convention because it is not a party to that convention

- including airlines in the ETS “infringes neither the principle of territoriality nor the sovereignty of third States, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the Member States of the EU and are thus subject to the unlimited jurisdiction of the EU.

- the ETS “does not infringe the obligation to exempt fuel from taxes, duties, fees and charges. In contrast to the defining feature of obligatory levies on the consumption of fuel, in the case of the scheme in question there is no direct and inseverable link between the quantity of fuel held or consumed by an aircraft and the pecuniary burden on the aircraft’s operator in the context of the emissions trading scheme’s operation. The actual cost for the operator depends, inasmuch as a market-based measure is involved, not directly on the number of allowances that must be surrendered, but on the number of allowances initially allocated to the operator and their market price when the purchase of additional allowances proves necessary in order to cover emissions.”