Global or Local?

Airlines call for broad, international CO2 regulations, fear
contending with ‘patchwork quilt’

Airlines around the globe generally have come to accept that regulation of their carbon dioxide emissions is inevitable. But while understanding that CO2 regulations will become a fact of doing business, the air transport industry is furiously pushing government authorities to impose the standards on a global basis, preferably through ICAO.

Commercial aviation’s advocates say that even a tough international CO2 regulatory regime would be far more tolerable than a hodgepodge of requirements imposed individually by governments throughout the world. “I can’t imagine what could be worse than an American Airlines or a British Airways having a flight across a dozen borders and essentially paying a dozen times for the same tank of gas,” US Aerospace Industries Assn. VP-Civil Aviation Dan Elwell tells ATW.“That would not be sustainable.”

IATA Director-Aviation Environment Paul Steele concurs, warning that “there is a big danger at the moment” of authorities enacting “a patchwork quilt of overlapping, duplicative measures which for a global industry like aviation is a nightmare.” He paints a picture of a possible scenario later this decade in which an airline is operating a New York JFK-London Heathrow-Sydney routing: “You could have a fuel charge [imposed by the US government] on the New York-London leg, which would also be subject to the EU Emissions Trading Scheme. Then when you take off from London, passengers have to pay an environmental tax [imposed by the UK government] and then you’re also subject to the EU ETS again. And you may think you’ll get to Sydney and life will be easier, but Australia, New Zealand, Japan and South Korea are all now talking about introducing emissions trading and so the flight could be subject to pay again [to Australian authorities].”

Not only would this create a potentially unsustainable cost burden on the carrier, he says, but it could encourage airlines to operate “around” CO2-regulated countries, creating a “carbon leakage” situation in which governments intending to track and charge for emissions are inadvertently pushing airlines to operate on routes where emissions don’t have to be reported or paid for, thus undermining the central purpose of regulating CO2: Determining the amount of emissions as precisely as possible and ensuring they are kept at a manageable level.

Ticking Clock

The race is on to settle on a global regulatory system for airline CO2 emissions before carriers operating to, from or within the EU become part of the ETS in 2012, and before the US government imposes its own restrictions on the industry through legislative action or an Environmental Protection Agency rulemaking. “Air transport is completely international,” Elwell says. “We typically emit from a single aircraft across multiple borders. To pay for carbon again and again and again just doesn’t make sense.”

Airlines that will come under the auspices of the ETS already are reporting their emissions to relevant authorities. As the regulation currently is written, carriers’ 2010 CO2 levels will serve as the “baseline” for emission allowances starting in 2012, although this is being challenged by some airlines that point to the massive reduction in flights this spring caused by the Icelandic volcanic eruption.

Additionally, the Washington-based Air Transport Assn., American Airlines, Continental Airlines and United Airlines late last year initiated a legal challenge in the UK High Court of Justice against aviation’s inclusion in the ETS, arguing that it violates the Chicago Convention, the Kyoto Protocol, the US-EU open skies agreement and is “contrary to the customary international law principle that each state has complete and exclusive sovereignty over the airspace above its territory.” The suit was filed in the UK because most US airlines subject to the ETS are reporting to UK authorities. ATA says its aim is to convince the UK court to refer the case to the EU Court of Justice, which would have jurisdiction to issue a broad ruling against aviation’s inclusion in the ETS. 

The legal process is likely to take a long time, but IATA DG and CEO Giovanni Bisignani told ATWearlier this year that he believes the very existence of such challenges will force the EU to postpone aviation’s inclusion. “I am convinced it will not happen” in 2012 as scheduled, he said. “You will see that many governments will legally challenge the unilateral approach of EU ETS in the coming years.” While EU officials have held firm on the scheme, they’ve indicated that a global agreement on air transport CO2 emissions would allow them to reconsider their approach. Meanwhile, climate change proposals that could impact air transport are circulating through the US Congress and the Obama administration.

Congressional Action

There has been a great deal of talk in the halls of Congress regarding enactment of a comprehensive energy law that would place limits on CO2-emitting industries, but building a coalition large enough to actually pass a bill that can be sent to President Barack Obama’s desk is proving quite difficult.

The House of Representatives last June narrowly passed the Waxman-Markey American Clean Energy and Security Act (named for Democratic co-sponsors Henry Waxman of California and Ed Markey of Massachusetts), a 1,200-page bill that aims to place limits on US CO2 emissions and create a cap-and-trade regime for most industries with the intention of reducing GHG emissions by 17% from 2005 levels by 2020 (ATW,5/09, p. 24).

US airlines quickly denounced the bill, particularly a provision that calls for a surcharge on fuel purchases to cover the cost of carbon permits that fuel producers would have to acquire. ATA estimated the added collective cost for US carriers from the surcharge at $5 billion in 2012, rising to $10 billion by 2020. ATA President and CEO James May said that the “cap-and-trade bill creates an onerous fuel tax on the airline industry.”

Airlines were far from alone in opposing the Waxman-Markey bill, which almost immediately was a nonstarter in the Senate. Congressional efforts to pass energy legislation came to a standstill in the second half of last year as the words “cap-and-trade” became politically toxic.

A Clear and Present Danger

With no CO2 regulations coming from Congress, EPA moved to fill the void in late 2009, issuing a formal finding that greenhouse gasses including CO2 emissions “threaten the public health and welfare of the American people.” The effort, which had been blocked by the Bush administration, is based on authority granted EPA in a 2007 decision by a deeply divided Supreme Court. It will clear the way for the agency to regulate a wide range of CO2-emitting industries under provisions of the Clean Air Act even if Congress fails to act. But first it must survive a raft of lawsuits challenging EPA’s authority in the matter.

EPA Administrator Lisa Jackson said the agency’s “endangerment finding” was not meant to preempt legislative action by Congress, insisting that EPA CO2 regulations and those mandated by legislation could be “complementary.” She added, “I certainly hope to see [Congress] move quickly.” While she noted that the finding was directly relevant to the automotive industry in the near term, she left open the possibility of regulating other industries. According to a report prepared this year by Congressional Research Service Specialist-Environmental Policy James McCarthy, Section 231 of the Clean Air Act gives the EPA administrator the authority to “propose emission standards applicable to any air pollutant from any class of aircraft engines which in the administrator’s judgment causes, or contributes to, air pollution which may reasonably be anticipated to endanger public health or welfare.”

But even many of Congress’s liberal advocates of strong climate change legislation are wary of EPA’s creating CO2 regulations, and early this year momentum developed in the Senate for a compromise bill that would both strip EPA of its authority to regulate CO2 and set emissions standards that would be more politically palatable than those in the House bill.

Sens. John Kerry (D-Mass.), Joe Lieberman (I-Conn.) and Lindsey Graham (R-S.C.) spent months hashing out a proposal they hoped would gain broad support. Their plan would initially only cap emissions by utilities, holding off on placing restrictions on other industries for some time. But it also mandates emissions permits that transportation fuel producers would have to purchase on a quarterly basis.

Any tax placed on fuel producers would be “the wrong approach for aviation,” ATA VP-Environmental Affairs Nancy Young tells this magazine. She warns that oil companies would pass government-imposed CO2 charges on to “consumers,” including airlines, and “siphon money out of aviation” that should be used for modernizing aircraft fleets and investing in alternative fuels. “It would be a direct and significant increase of airline fuel costs,” she says. “[Lawmakers] often don’t think of airlines as consumers, but when it comes to purchasing fuel, that’s exactly what [airlines] are.”

Graham dealt the effort a serious blow when he walked away from the compromise early last month, reportedly upset at efforts by Democrats to place the highly charged immigration issue on the Senate agenda as well. And the massive oil spill in the Gulf of Mexico cast doubt on a key provision of the Kerry-Lieberman-Graham bill that was supposed to help win support from Republicans: Expansion of offshore drilling. Graham said senators from both parties are reluctant to take on an energy bill until the oil spill’s cause is determined and the extent of its damage is known.

Nevertheless, Kerry and Lieberman appear intent on moving forward without Graham. While full details of their bill were not known as this magazine went to press, Young cautions that “we’re still concerned that senators are thinking of lumping all of transportation together.” Regulators need to take a “global sectoral approach” to air transport, she says.

Aggressive Targets  Steele says the international air transportation industry has made a concerted effort to “get our house in order” by proposing aggressive CO2 emissions targets. The aim is to have a comprehensive framework for regulating aviation’s emissions on a global basis accepted and endorsed at ICAO’s 37th General Assembly in Montreal Sept. 28-Oct. 8 so that an accord can be presented at the UN meeting of the word’s environmental ministers in Cancun Nov. 29-Dec. 10.

IATA, Airports Council International, the Civil Air Navigation Services Organization and the International Coordinating Council of Aerospace Industries Assns. issued a joint paper last September urging governments to adopt three targets for commercial aviation: 1) Improving fuel efficiency by an average of 1.5% annually to 2020. 2) “Stabilizing” CO2 emissions from 2020 with “carbon-neutral growth.” 3) Reducing net CO2 emissions by 50% compared to 2005 levels by 2050.

ICAO’s October 2009 High Level Meeting on International Aviation and Climate Change stopped short of adopting all of those recommendations, although it raised the fuel efficiency target to 2% annually from the 1.5% proposed by stakeholders and extended that goal beyond 2020 to 2050 “as an aspirational goal.” Earlier this year, ICAO’s Committee on Aviation Environmental Protection committed to a timetable for the development of a CO2 standard for commercial aircraft engines, aiming to have it ready in 2013. CAEP also recommended more stringent standards for nitrogen oxides.

However, prospects for a firm, global agreement on regulating air transport’s CO2 emissions this year are highly uncertain, particularly with the wider international debate over GHG regulations far from harmonious. That discussion currently is dominated by a sharp disagreement between developed countries that want uniform standards that broadly apply and developing nations that would like to see developed states bear the brunt of CO2 restrictions for the foreseeable future.

Steele notes that the developing/developed debate clouds ICAO talks on regulating CO2. “The divide doesn’t make sense in aviation because we have a lot of developed aviation markets in developing countries,” he says, pointing to major Middle East carriers and successful Latin American airlines such as LAN. “It’s extremely frustrating when you can see some of the [ICAO] member states are not willing to shift or are caught up in the larger [developed/developing] issues and not willing to address issues that are relevant to aviation. But that’s the political reality we’re dealing with.”