CapitolWire Dec 2012.pdf - Bertelsmann Foundation

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In the Air:
International Aviation-Emissions Regulation
CapitolWire is a joint publication of the Bertelsmann Foundation offices in Washington, DC and Brussels. It connects the European Parliament
to Congressional policy and politics, and contributes to a common trans-Atlantic political culture. CapitolWire is an occasional publication that
highlights issues, legislation and policymakers relevant to the European Parliament’s legislative cycle. This publication also looks at the Congress
from the point of view of European Parliament staffers and offers timely operational analysis.
KEY POINTS
• On November 27, 2012 US President Barack Obama signed into law The European Union Emissions Trading Scheme Prohibition Act of 2011. The law grants
the transportation secretary authority to prohibit US airlines from participating in the EU Emissions Trading Scheme (ETS).
• The EU granted to non-EU air carriers on November 13, 2012 a nearly yearlong exemption from complying with the EU ETS due to increased pressure from the US
and International Civil Aviation Organization (ICAO) members.
• However, if the ICAO fails to reach an international agreement on aviation emissions in 2013, the EU maintains that it will incorporate non-EU carriers into
the EU ETS.
The EU introduced aviation into its emissions
trading system (ETS) in 2008. It became an
international point of contention in January
2012 as ETS requirements went into effect for
all incoming and outgoing commercial flights
at EU airports, regardless of carrier nationality
and time spent in EU airspace.
The global aviation industry and many
governments have expressed opposition
to the inclusion of non-EU air carriers.
ICAO members, including the US, signed a
declaration in 2011 to this effect. In February
2012, Congress passed its first legislation with
EU ETS prohibition language. Section 509 of
the Federal Aviation Administration (FAA)
Modernization and Reform Act of 2012 (P.L.
112-95) expressed the “sense of Congress”, a
majority Congressional opinion, not public
law, that implementing the international
aviation provisions of the EU ETS is
inconsistent with the Chicago Convention on
International Civil Aviation. The legislation
urged the EU to work within the ICAO to
develop a consensual approach, and it
directed US government officials to ensure
that the ETS is not applied to US air carriers.
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The House and Senate then approved
additional bipartisan bills consistent
with Section 509 language. The Senate
unanimously passed S. 1956 The European
Union Emissions Trading Scheme Prohibition
Act of 2011, sponsored by Senator John
Thune, on September 22, 2012, just prior to
recessing for elections. After the November
ballot, the House voted on the Senate version
rather than a more nationalistic version that
passed the lower chamber in October 2011.
S. 1956 passed the House on November
13, one day after Connie Hedegaard, EU
commissioner for climate action, announced a
DECEMBER 2012

temporary exemption from the ETS for non-EU year exemption period—it made official the
airlines. She cited progress at ICAO-led Inspiring global US People. government’s Shaping support of an the international Future.
CapitolWire
negotiations on the issue as the reason for the approach to reducing aviation emissions.
exemption.
The EU’s proposed freeze on the application
to non-EU air carriers is set to continue
The Brussels Connection to Capitol until the 2013 Hillmeeting of ICAO, by which
time an international agreement on aviation
emissions may be achieved. Regardless of
the temporary exemption, President Obama WASHINGTON, DC
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signed S. 1956 into law on November 27, 1101 2012. New York Avenue, NW Résidence Palace
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Rue de la Loi 155
Though the EU’s announcement rendered the
Washington, DC 20005 USA 1040 Brussels, Belgium
legislation irrelevant—at least for the
Contact:
one-
Tyson Barker
Contact: Thomas Fischer
Sponsor of S. 1956: Senator John Thune (R-South Dakota)
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E-mail: thomas.fischer@bertelsmannstiftung.de
The US Argument
Washington’s stance on EU ETS has been to
“support the goals, but oppose the action”,
as Senator John Rockefeller, chairman of
the Committee on Commerce, Science and
Transportation, mentioned in a June hearing
on the act. Proponents of S. 1956 recognize
the necessity to reduce aviation’s impact on
the environment but prefer an international
approach.
The EU ETS includes regulation of emissions
produced by carriers while operating outside
EU airspace and in countries that are simply
being overflown. But the global aviation
industry, the US and other countries contend
that mandatory participation by non-EU
air carriers in the ETS is a violation of state
sovereignty. The US argues that international
obligations of the Chicago Convention of
1944 negate EU jurisdiction over regulating
emissions in foreign or international
airspace. The EU is not a signatory to the
Chicago Convention, although all EU member
states are.
The costs of compliance are yet another
concern. Though estimated to be minimal
initially, charges to airlines and passengers
are expected to increase as the EU ETS cap
on total carbon-dioxide emissions decreases
and the EU provides fewer CO 2
allowances for
air carriers to purchase. Estimates vary widely,
but the US aviation industry believes the
levies would amount to $3.1 billion between
2012 and 2020.
S. 1956: The EU ETS Prohibition Act
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Market vulnerability and the use of collected
revenues are other American concerns. A
Senate Committee on Commerce, Science
and Transportation report cites a European
Commission proposal in July 2012 to raise
carbon prices as evidence of the market’s
susceptibility to manipulation. The ETS also
has no requirement that revenue collected
under the scheme must be used in research
and development or initiatives aimed at
reducing aviation emissions.
The EU ETS Prohibition Act permits US air
carriers to refuse participating in the EU ETS
and gives the transportation secretary the
authority to prohibit them from doing so.
The act also directs the secretary, the Federal
Aviation Administration (FAA) administrator
and other officials to pursue an international
agreement while ensuring US airlines are not
penalized under the EU ETS.
Two key amendments were added to S. 1956 to
protect US taxpayers and grant the secretary
more flexibility in determining US air-carrier
participation. The first amendment, proposed
by Senator Benjamin Cardin (D-Maryland),
prohibits the use of taxpayer money to cover
any taxes or penalties imposed on US air
carriers for non-compliance with the EU-ETS.
The senator’s proposal is partly in response
to a provision of the EU ETS that makes an
airline’s non-compliance subject to an “excess
Key components of the EU ETS Prohibition Act of 2011
Grants the transportation secretary the authority to prohibit US aircraft operators
from participating in the EU ETS if deemed to be in the public interest
Directs the transportation secretary, the Federal Aviation Administration chief and other
appropriate officials to enter into international negotiations on aircraft emissions
Directs appropriate officials to use applicable measures under existing
authorities to ensure US air carriers are exempt from the EU ETS
Prohibits the use of taxpayer dollars to pay for taxes and penalties
imposed on US air carriers for non-compliance with the EU ETS
Allows the transportation secretary to re-assess prohibiting
US air carriers from participating in EU ETS
DECEMBER 2012
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emissions penalty” equivalent to US$130 for public interest are made, and after any US
each ton of carbon-dioxide emissions Inspiring above regulation People. of aviation Shaping emissions the is passed. Future.
CapitolWire
its allowance. Harsher measures may also be This amendment was key to addressing
imposed, including the possibility of banning Congressional concern about a possible USan
air carrier from the EU.
EU trade war over the emissions issue.
The second amendment, proposed by
The Brussels Connection to Capitol Senator Jeff Hill Merkley (D-Oregon), allows
the transportation secretary to re-assess
prohibiting US air carriers from EU ETS
participation. The secretary can do this WASHINGTON, at DC
any time but is required to do so after 1101 an New York Avenue, NW
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international agreement is reached,
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amendments to the EU directive affecting US
Contact: Tyson Barker
Contact: Thomas Fischer
For prohibition US Transportation Secretary Ray LaHood
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E-mail: thomas.fischer@bertelsmannstiftung.de
can stop US airlines form participating in the EU ETS.
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US Efforts to Reduce Aviation Emissions
Rather than regulating greenhouse-gas
emissions through market-based approaches,
the US government is pursuing policies
to reduce emissions by developing a
modernized air-traffic control system, cleaner
air technology and alternative aviation fuels.
The FAA released an “Aviation Greenhouse
Gas Emissions Reduction Plan” in June 2012
that focused on operational and technology
improvements, developing and using
alternative fuels, and pushing policies and
research that support these improvements.
The plan estimates that improvements in
technology and operations will reduce CO 2
emissions by 47 million tons in 2020.
Next Steps
The US has already begun implementing its
Next Generation Air Transport System, known
as Next Gen, a satellite-based air-trafficmanagement
system aimed at creating more
efficient and direct airline routes. This system
will reduce an estimated 1.4 billion gallons of
aviation fuel and 14 million metric tons of CO 2
emissions through 2020. The US has also taken
steps, outlined in the presidential directive
“Blueprint for A Secure Energy Future”, to
reduce its foreign energy dependence. The
blueprint reflects a commitment to increasing
the use of alternative fuels in the aviation
sector.
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The European Commission and the FAA
already cooperate in this area through the
Atlantic Interoperability Initiative to Reduce
Emissions (AIRE) program, which was
launched in 2007. AIRE’s focus is to improve
fuel efficiency, lower aviation emissions and
reduce aircraft noise. The US participated in
three AIRE demonstration projects in 2010
and 2011 that concentrated on reducing
fuel burn and emissions through flightoptimization
procedures.
Improvements in aviation design, air-traffic
operations, and alternative fuels will create
reductions in CO 2
emissions. Nevertheless,
an increase in fuel consumption and a
more heated aviation-emissions debate are
anticipated as international flight operations
rise and the number of air passengers globally
doubles to six billion by 2026.
Over the past 15 years, the ICAO has made
little progress towards an international
agreement on an aviation-emission-trading
scheme. The slow pace has led Australia
and New Zealand, like the EU, to include the
aviation sector in their domestic emissions
schemes. However, both countries exempted
international air carriers from any levies.
in millions of tons of CO 2
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
1998
Percent Changes in CO 2
Emissions
from International Aviation in the US and EU
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
US
EU
For its part, the ICAO has established a highlevel
group to formulate recommendations
and a feasibility study for an international
aviation market-based emissions measure
scheme. The group will deliver its report and a
measuring framework at the ICAO’s September
2013 assembly. Commissioner Hedegaard has
Source: IEA CO 2
emissions estimates
asserted that including non-EU air carriers in the EU ETS will resume if the ICAO is unable to
conclude a global agreement by then. The US transportation department is optimistic that that
won’t be the case.
DECEMBER 2012
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