The European Union is again flexing its market muscle to force improvements in environmental regulation. This time, the E.U. has decided to cap emissions from aircraft--and not just European aircraft. Under the agreement starting in 2012, all airlines coming or going in European airports will have to buy pollution credits. The credits are managed under the European Union Emissions Trading Scheme, the largest cap-and-trade program in the world.

The boldness of this move cannot be understated. Airline associations are fuming, as they are already dealing with rising fuel costs and sketchy profit margins. The United States has been vehemently against the measure, and has recently knocked down attempts at establishing its own emissions regulation framework.

The E.U. has said though, that it would consider waiving the credits for airlines covered under similar emissions reduction policies, to avoid double regulation. In this sense, they are encouraging countries to develop their own policies to avoid having to submit to European regulation.

This step also begins to address one of the biggest deficiencies of the Kyoto agreement. Kyoto does not cover air travel, which is one of the fastest growing sources of emissions in the world.

So again, as with chemical regulation, the E.U. is taking a leadership position on environmental issues, and using its market power to force the rest of the world into compliance. Until there are some strong, effective international regimes to manage the global commons, or some real leadership on the part of the United States, I would expect to hear more in the future about the "Europe Effect," and the U.S. had better get used to being a follower.

Cross-Posted to On Day One

(Image from Treehugger)