Tue 28 Apr 2009 – Climate change has moved high on the US political agenda over the last month. This week, the Obama administration is convening a meeting of 17 major developed and developing nations in Washington to begin talks on international action as a prelude to the UN climate summit in December. Tougher regulations on aircraft greenhouse gas emissions are now likely from the US Environmental Protection Agency and the proposed Waxman-Markey bill currently being debated on Capitol Hill seeks to introduce an emissions cap-and-trade system that will impact on US airlines.
This is therefore a busy time for industrial lobbyists such as the Air Transport Association of America (ATA), representing the bulk of US airlines, which is tasked with scrutinizing and reacting to the proposals.
Nancy Young, Vice President of Environment at the ATA, said the Waxman-Markey discussion draft has some significant similarities to the unsuccessful Lieberman-Warner Climate Security Act proposed last year but also some significant differences as well.
“As a discussion draft they are leaving room open for adjustments,” she told GreenAir Online. “On a couple of key issues they have made no proposals: there is no mention of the level of free allowances and what would happen to the revenues raised by the auctioning of those allowances that would have to be paid for. These are big structural differences from Lieberman-Warner.”
Lieberman-Warner would have required a cap-and-trade scheme to apply upstream to the fuel providers, who in turn would have passed on their costs to airlines, effectively as a tax on fuel, without any free allocation of allowances to the airlines. Waxman-Markey proposes a similar approach but, said Young: “What we don’t know is whether or not we would get any free allowances. We believe we have a good case for receiving them based our historical achievements on fuel efficiency.”
She said a mechanism could be applied that required the fuel companies to pass on their free allowances to airlines.
“You can’t set the same fuel efficiency target for every industry because each has a different record going into a cap-and-trade scheme and different opportunities for abatement of their greenhouse gases. In the ATA’s view, perhaps that weighs in favour of us not being covered by a cap-and-trade scheme at all but if we are then we should be entitled to free allowances and other mechanisms to mitigate the harm it will do to our industry.”
She said that the ATA strongly supports that any auctioning revenues should be reinvested in aviation infrastructure – another important issue not covered in the proposed bill – giving as an illustration the requirement of upgrading aircraft to be compatible with the future modernization of the US air traffic control system. “That would be an example of how the government, who is generating income from an emissions trading scheme, could re-channel those revenues into complementary policies that could help the aviation industry as well as the environment.”
Young understands the Waxman-Markey draft will not, as it stands, make a distinction between fuel used for domestic flights and that for international flights, which, she points out, will run the risk of violating obligations set out in the Montreal treaty governing international civil aviation in much the same way as the ATA has argued that the inclusion of US airlines into Europe’s Emissions Trading Scheme is also in contravention.
“We are hopeful, though, that as this proposed bill is still a discussion draft we will be able to get across some of our ideas across to Congress as they further refine the legislation,” she said. “It does seem that the US will come up with an emissions trading scheme within the next couple of years and US industry is getting to grips with our President and Congress becoming focused on making that happen, so the question is how we productively shape what comes out. From our point of view, a coordination with the international community is a critical aspect of that.”
In 2007, the US Supreme Court ruled that the US Environmental Protection Agency (EPA) would have the authority to regulate greenhouse gas emissions if it found human health would be endangered by global warming pollution. In a ruling last month, the EPA concluded that such emissions did indeed pose a threat.
Co-sponsor of the bill, Edward Markey, said recently that the threat of tough regulation by the EPA should convince industrial lobbyists that it was in their best interest to work with Congress on the issue and not fight the legislation.
The Waxman-Markey bill directs the EPA to “promulgate standards applicable to emissions of greenhouse gases from new engines used in aircraft by December 31, 2012.”
Young said it was very unusual for Congress to say “just do it” without giving the EPA the discretion it needs to make its own judgements. “We would expect revisions in the bill to clarify this.”
Young said the EPA, the FAA and the international aviation community through ICAO have already looked at the issue. “We have no problem with the EPA looking at it again and under treaty they would need to do so in consultation with ICAO as the international standards setting body. In fact, ICAO already has on its agenda plans to relook at setting GHG emissions standards for aircraft. Our concern is whether demanding the EPA take action within a certain timeframe makes sense.” She says the EPA is required to consult with the FAA as safety issues are also involved.
Another provision in the bill is the creation of a low-carbon fuel standard (LCFS) which would require fuel producers to reduce the carbon content of transportation fuels, including jet fuel. “ATA is extremely dedicated to striving towards using more environmentally-friendly fuel, so we are very comfortable with such a policy move,” said Young.
“Where we are concerned is that there may be unintended consequences. It is easier for the fuel companies to reduce the carbon content in fuels for ground-based vehicles like automobiles than it is for planes. Jet fuels are a higher hurdle because of the safety issues and the rigorous specifications that have to be met. Fuel companies might therefore choose the less demanding option. We are exploring ways with Congress on how to avoid this.”
By not including jet fuel in directives that mandate fuel suppliers to lower the carbon content of transportation fuels, as is the case in Europe, it is not helping the airline industry’s drive to ramp up the use of jet biofuels, she argued. In her view, suppliers should be incentivized to invest resources in developing low carbon jet fuels.
As the ATA responds to the proposed Waxman-Markey cap-and-trade bill, Young confirmed it is also working on its comments on the UK’s consultation on legislation confirming the first steps towards the inclusion of airlines into the EU Emissions Trading Scheme. “It will be no surprise to many that the ATA will repeat its earlier concerns about the legal issues in addition to our comments on the mechanics of the scheme,” she said.
Young pointed out that although US airlines have received communication from those European authorities administering the scheme, legislation still has to be passed in the individual countries. With the August 31 deadline looming, she said there was still a lack of clarity and direction on the issue. “The monitoring, reporting and verification rules the European Commission is considering are not yet final. Our members are starting to figure out how to produce the monitoring plans by the deadline but they don’t yet even have a final directive on what will be required.
“It is clear that European regulators are convening with European airlines but not with those outside. Our airlines will do what it takes to comply with the ETS directive but we are still hopeful it will ultimately be withdrawn in favour of something else.”
Young firmly believes some country will oppose it, even if it is not the United States. “There is also nothing to preclude a private course of action,” she said, suggesting the US airlines themselves could mount a legal challenge. “We are hanging back to see if the country-to-country approach engages.”