Progress at ICAO Reveals Hope for a New Worldwide Carbon Dioxide Standard

In a major move forward in the effort to establish a worldwide carbon dioxide standard for aircraft, the International Civil Aviation Organization’s (“ICAO”) Committee on Aviation Environmental Protection unanimously approved a metric to characterize CO2 emissions, taking into consideration such influences as fuselage geometry, maximum take-off weight, and fuel-burn performance.  With this step behind the Committee, work will begin on creating a new CO2 aircraft standard, including defining the certification procedures and determining the standard’s scope of applicability.  ICAO’s press release can be found here.

Industry leaders call this a major milestone, but agree that this is merely one step towards establishing an international standard by the end of 2013.  This announcement, however, has done little to temper the European Union’s plan to implement the Emissions Trading Scheme (“EU-ETS”).  It has though given support to those countries that oppose inclusion in the EU-ETS.  The United States Departments of State and Transportation hosted 16 countries from July 31 to August 1, 2012 to discuss alternatives to the controversial scheme. Countries participating were Australia, Brazil, Canada, Chile, China, Colombia, India, Japan, Korea, Mexico, Nigeria, Russia, Saudi Arabia, Singapore, South Africa, and the United Arab Emirates.

All attending countries favor national and regional measures to reduce aviation emissions; however, each has stated their opposition to the EU plan, and would rather see a global, sector-led standard created through ICAO. Representatives from the European Commission were not invited according to a spokeswoman for the Commission, but were briefed on the meeting’s results. This meeting follows a February gathering in Moscow of 20 countries which agreed on retaliatory measures if the EU-ETS’s inclusion of non-EU aircraft continues moving ahead.

At the same time of this meeting, the Senate Commerce, Science, and Transportation Committee unanimously approved a bill to bar the EU from extending its carbon caps to the U.S. airline industry. This approval moves the bill closer to a Senate floor vote after the August recess. A similar bill was passed by the House of Representatives in October 2011 and is described in more detail here. The passage of this bill follows the sub-committee hearing described earlier in this blog. EU officials immediately criticized the bill.

Chinese and Indian Airlines Miss Deadline for Submitting 2011 Greenhouse Gas Emissions Data; However, Despite Objections US Airlines Comply

It was recently reported that eight Chinese and two Indian airlines failed to provide data on their 2011 greenhouse gas emissions, as required under the European Union Emissions Trading Scheme (“EU-ETS”). Both governments had previously signaled that their respective airlines would not comply with this requirement. As mentioned before in an earlier post, China and India are just two of many countries that are fighting inclusion in the EU-ETS, however, airlines from other objecting countries such as the United States, Russia and Brazil did provide timely emissions data.

According to Connie Hedegaard, the EU’s Commissioner on Climate Change, the ten noncompliant Chinese and Indian airlines account for less than 1% of the more than 1,200 airlines that are subject to the trading scheme. EU authorities have given the noncompliant airlines a fast-approaching deadline of mid-June to submit their emissions data.

It is important to note that the EU Commission has provided non-EU airlines a way out. Non-EU airlines can be exempted from the scheme if their home countries adopt “equivalent measures” to reduce aviation greenhouse gas emissions. China has taken a recent step that may fit this exclusion. Chinese airlines levy fees on passengers for airport construction; recently however, these fees have been repurposed into a general civil aviation development fund to be used on energy conservation and emissions reduction schemes, along with other non-emissions related projects. According to Hedegaard, the EU delegation in Beijing is reviewing this move to determine whether it qualifies as an equivalent measure.

If it does qualify, will other countries follow China and adopt similar “equivalent measures”? Or, will taking advantage of the “equivalent measures” exclusion be seen as accepting regulation by the EU? Objecting countries have consistently stated that their position is more about national sovereignty than environmental protection. 

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

Inclusion of Non-European Union Aviation Sector in Emissions Trading System Does Not Violate International Law

As noted in earlier posts, beginning January 1, 2012, the European Union ("EU") plans to include the aviation sector as the second largest industry in its carbon Emissions Trading System ("ETS"). The plan requires all airlines, including airlines operated out of non-EU countries, to use emissions allowances for flights to or from European airports. The international community has spoken out against this measure, with more than 20 countries, including the United States, China, India, Japan, and Russia, signing a declaration vowing to challenge the EU's plan. The Air Transport Association of America, American Airlines, Continental Airlines, and United Airlines took further steps, filing an action in the High Court of Justice of England and Wales arguing that inclusion in the ETS would place them under U.K. authority. Air Transport Ass'n of America v. Secretary of State for Energy and Climate Change, EU Court of Justice, No. C-366/10. The High Court referred the case to the EU Court of Justice for an interpretation of EU law.

On Thursday, October 6, 2011, Advocate General Juliane Kokott wrote an advisory opinion on behalf of the EU Court of Justice finding that the EU's inclusion of the entire airline sector does not infringe on the sovereignty of other states or international agreements, including the U.S.-EU Open Skies Agreement, the Kyoto Protocol, or the Chicago Convention on International Aviation.  Although the opinion is non-binding, the advocate general's opinion normally predicts the final judgment of the case, which is expected in early 2012. For more details, please see the BNA Daily Reporter article or LAW360 article. As this issue progresses, please check back to this blog for future posts. 

European Commission Confirms that Aviation Sector will Become Second Largest Industry in Carbon Trading System

Special thanks to Sullivan & Worcester's Van Hilderbrand and Ari Hoffman, environmental intern, for preparing this post.

As a follow-up to our October 20, 2010 post entitled “Climate Change: International Regulation of GHG Emissions From Aircraft,” on June 6, 2011 the European Commission (“EC”) confirmed its earlier March 2011 announcement that the aviation sector will become the second-largest industry in Europe’s carbon Emissions Trading System (“ETS”), behind only power generation. The aviation sector is set to join the market on January 1, 2012, giving airlines an initial 213 million metric ton carbon dioxide (“CO2”) limit in 2012 and a 208.5 million metric ton limit in 2013. European Union (“EU”) climate commissioner, Connie Hedegaard, states the reason for the aviation sector’s inclusion is that “emissions from aviation are growing faster than from any other sector, and all forecasts indicate they will continue to do so under business as usual conditions.” 

The EU’s carbon cap-and-trade system is the world’s largest, allowing businesses that exceed their CO2 allowance levels to buy spare permits from companies that do not reach the limit, or else pay a fine. The fine for exceeding the CO2 allowance level for the aviation sector will be 100 euros for every ton of CO2 emitted above the limit. The EU is presenting the ETS as a “pollution ceiling” not a tax, stating that “airlines have the choice to reduce emissions or buy allowances.” Either way, the cost will be passed on to passengers. Lufthansa airlines has estimated that joining the carbon market will cost 350 million euros annually. The EC has estimated a rise in airline fares within Europe between 1.80 euros and 9 euros. In addition, the airline industry has estimated that the inclusion in the ETS will increase the cost of a roundtrip flight from New York to Brussels by 15 euros.

 

Last month, Steve Ridgway, Chairman of the Association of European Airline and chief executive of Virgin Atlantic along with Tom Enders, chief executive of commercial aircraft manufacturer Airbus warned that including the aviation industry in the emissions trading system would create a trade conflict with the world’s major economic and political players. International Airlines Group (“IAG”) chief executive Willie Walsh has voiced fears that Chinese, American and Russian governments will retaliate if forced to participate in the ETS starting next year. The ETS is already being challenged by the American Air Transport Association (“ATA”) in the European courts and Mr. Walsh fears more conflicts are to come. In response to the latest EC move, the head of the China Air Transport Association (“CATA”), Wei Zhenzhong, said: “I believe we have to take legal action.”

Despite the possible competitive disadvantage created for European airlines and harsh criticism from non-European airlines, the EU’s governing bodies “do not intend to back down” and insist that their plan to include the aviation industry in the ETS is entirely consistent with International Law. As this issue progresses, please check back to this blog for future posts.

Climate Change: International Regulation of GHG Emissions from Aircraft

The Kyoto Protocol and the United Nations Framework Convention on Climate Change specifically exclude international emissions from aviation transport from developed countries’ national targets. Instead, Kyoto calls on the International Civil Aviation Organization (ICAO) to tackle the issue. Until recently, however, the ICAO had not been able to reach agreement on substantive binding actions aimed at limiting greenhouse gas (GHG) emissions.

On October 8, 2010, the 190 members of the ICAO approved a resolution in which they agreed to improve fuel economy and strive to limit GHG emissions from aircraft. Per the resolution, the ICAO set a goal to improve fuel efficiency 2 percent per year through 2050, cap GHG emissions at 2020 levels, develop a global framework for the use of alternative fuels, and propose a GHG emission standard for aircraft engines by 2013.

The ICAO also agreed to develop a framework for market-based measures (MBMs) and issued 15 guiding principles for the design and implementation of MBMs for international aviation. These principles are intended to minimize market distortions, ensure that aviation is treated fairly relative to other sectors, guarantee that aviation’s emissions are counted only once, and recognize past and future efforts of carriers to minimize emissions. Member states are encouraged, but not required, to submit action plans to the ICAO by the end of June 2012, outlining their plans for reducing and reporting their international aviation GHG emissions.

The European Commission (EC) entered an objection over sections of the resolution that refer to guiding principles that may conflict with the European Union (EU) emissions trading system (ETS), which will include aviation beginning in 2012. Beginning in 2012, the EU ETS will require non-commercial operators and most commercial operators who conduct flights that arrive or depart from airports located in the EU to reduce GHG emissions. Commercial operators that emit less than 10,000 metric tons of carbon per year or operate fewer than 243 flights per period for three consecutive four-month periods are exempted.

In the first year, the EU ETS aviation cap will be set at 3% below the established baseline, which is set at the sector’s emissions between 2004 and 2006. The cap will then be reduced to 5% below the baseline. It is expected that operators will be required to reduce their emissions by more than 200 million tons of carbon equivalent. Operators will be awarded free allowances based on a formula called revenue per ton per kilometer (RTK), which measures weight and distance traveled, but initially will be required to purchase 15% of their necessary allowances. The International Air Transport Association estimates that compliance with the EU ETS will cost the industry at least 2.4 billion euros, or about $3 billion, a year.

Business aviation operators have complained that the EU ETS favors commercial airlines to the disadvantage of smaller, private operators. For example, as noted above, certain commercial operators are exempted from the system, but these exemptions do not apply to non-commercial operators. In addition, business aviation operators will be required to purchase a greater percentage of allowances because the RTK formula will award more free allowances to scheduled airlines and freight companies, which carry far more payload weight than business aviation flights. Moreover, business aviation operators will incur substantial transaction costs complying with the system, especially considering the relatively small number of credits a typical business aviation operator will be required to purchase.

In December 2009, American Airlines, Continental Airlines and United Airlines, backed by the Air Transport Association, filed for judicial review in the British courts, challenging their inclusion in the EU ETS. The airlines are arguing that the EU lacks jurisdiction to regulate flights to and from the United States. On January 20, 2010, the UK Government referred the matter to the European Court of Justice. The suit is pending.

The EC plans to go forward with implementation of the EU ETS as it relates to aviation emissions. In fact, the EC believes that the ICAO has tacitly approved its plan, since the EU ETS is consistent with all 15 principles for MBMs and the ICAO members declined to include language that would have required the agreement of other states before application of the EU ETS to their airlines.