Business Aviation Law Blog

Mr. Edward M. Bolen, NBAA, Emphasizes the Disparate Treatment of the General and Business Aviation Sector under the EU-ETS

As discussed in earlier posts, “House Passes European Union Emissions Trading Scheme Prohibition Act,” and “Coalition Lobbies Senate on Passage of EU-ETS Prohibition Bill,” the U.S. Congress is actively pushing to protect the U.S. aviation sector from being regulated under the European Union Emissions Trading Scheme (“EU-ETS”).  

The House convincingly passed House Bill H.R. 2594 in October 2011, and similar legislation was introduced in the Senate in December 2011 by Senator John Thune (R- S.D.) and co-sponsored by Democratic Senator Claire McCaskill (Mo.). During a hearing on June 6, 2012, the Senate Commerce, Science, and Transportation Committee again addressed the issue of U.S. aviation industry inclusion in the EU-ETS and its potential impact on operations. 

One of the panel witnesses, Mr. Edward M. Bolen, President and CEO of the National Business Aviation Association, underscored the fatal flaws of the EU-ETS, pointing to the unfair and discriminatory handling of the U.S. general and business aviation sector. Although the EU-ETS is unfair to the U.S. commercial aviation sector, it is even more unjust to non-commercial aviation. To illustrate the inequality, Mr. Bolen provided as an example that an airline may fly from Chile to Europe with two scheduled flights a day using a commercial aircraft, yet remain exempt from regulation as a “small emitter.” However, a U.S. based non-commercial flight that flies to Europe once a year is not provided the same exemption. As Mr. Bolen stressed at the 11th Annual Aviation Summit in April 2012, registering under the EU-ETS is an expensive process -- a burden that is felt disproportionately by smaller operations that lack administrative resources. According to Mr. Bolen, many of the companies that are members of the NBAA have already spent thousands of dollars and hours registering and complying with the EU-ETS. More on this topic is available on the NBAA’s press release, including Mr. Bolen’s written statement to the Committee. 

Transportation Secretary Ray LaHood offered the administration’s point of view. Although Secretary La Hood refused to take a position on the pending legislation, he reminded the Committee that he and Secretary of State Hillary Clinton have made their opposition clear in multiple meetings with EU officials. According to Secretary LaHood, if the EU continues to move forward, the U.S. would consider direct action by submitting a formal Article 84 challenge under the Chicago Convention aviation treaty.

Panel witnesses Captain Sean Cassidy, First Vice President of the Air Line Pilots Association, International and Ms. Nancy Young, Vice President of Environmental Affairs for Airlines for America, along with several Senate Committee members, delivered further comments in opposition to the EU-ETS. The general themes of those comments were that: (1) the EU-ETS violates U.S. sovereignty; (2) there is no regulatory guarantee that any collected fees would be used to reduce aviation emissions; (3) the top priority at the Federal Aviation Administration is the implementation of NextGen technology, which will improve aircraft efficiency and reduce emissions, thus calling into question the need for the EU-ETS; (4) this regulation will most likely be viewed by the American public as a tax imposed by a foreign entity; and (5) this issue is more properly addressed using a global agreement through the International Civil Aviation Organization (“ICAO”).

Specifically, Ms. Young noted that the commercial aviation sector estimates that compliance will cost $3.1 billion from 2012 – 2020. According to Ms. Young, this translates into less money to invest in sustainable fuels and other fuel efficient technology.

In support of the EU-ETS, Mr. Jos Delbeke, Director General of the European Commission, Directorate-General for Climate Action, emphasized that the EU-ETS is not a tax, and that the EU would be willing to modify the scheme if other nations take specific action to curb aviation emissions or if ICAO develops a global agreement. Mr. Delbeke further stated that 90% of the emissions credits will be free and called into question the U.S. aviation industry’s estimates regarding the cost of compliance. Ms. Annie Petsonk, International Counsel, Climate & Air, Environmental Defense Fund stated that the EU-ETS was a reasonable measure, could help grow American jobs, and doesn’t intrude on U.S. sovereignty any more than U.S. fees intrude on the sovereignty of other nations. Ms. Petsonk also highlighted the small cost to travelers, $6 per round trip ticket, and stated that some EU member nations, such as Germany, have mandated that any collected money must be used for emissions reductions.

Senator John Kerry (D-Mass.) noted that the EU only took this step after a global solution could not be reached by ICAO, a point that was also made by Mr. Delbeke. Senator Kerry remarked that the U.S. has “dragged its feet” regarding regulating greenhouse gas emissions. He also observed that this issue signals just the beginning of the tough negotiations the international community will face in the future as it addresses such other global problems as water, food, energy and refugees.  

At this stage, it is difficult to see a way through. According to Mr. Delbeke’s statements, the EU is not contemplating suspending the EU-ETS. That leaves only a U.S. response. Senator Thune believes that he can garner enough support for his legislation, which will essentially hold harmless U.S. airlines that do not comply. Further, it is clear that the administration does not agree with the carbon cap measure. Unless ICAO can develop a solution quickly that is acceptable to the EU, the U.S. may be compelled to challenge the EU-ETS under the Chicago Convention treaty. In the meantime, the commercial and non-commercial aviation sector is stuck in limbo, still required to comply, but wondering for how long.     

The hearing has been archived on the Committee’s website.    

As this issue progresses, please check back to this blog for future posts.

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