Market Based Approach to Reduce Worldwide Greenhouse Gas Emissions Approved by United Nation's Aviation Agency

After two weeks of negotiations, a deal was reached at the International Civil Aviation Organization (ICAO) meeting in Montreal. The assembly of nations agreed to develop a market based approach by 2016 to be implemented in 2020. This resolution encourages countries to create new aircraft technology, adopt carbon dioxide standards, and utilize sustainable alternatives to jet fuel. Further, the measure promotes the engagement of member states in talks about the design of new carbon markets and the implementation of existing programs. This resolution makes air transport the first major industry sector to have a global model in controlling greenhouse gas emissions. The air transport industry currently accounts for 2 percent of global greenhouse gas emissions with projections of higher emissions by 2050.

As discussed in this blog previously, the European Union has been a leader in the effort to reduce greenhouse gas emissions and a driving force behind ICAO’s decision to address emissions on a global scale. On October 16, the European Commission relaxed its own controversial emissions regulations which would have included all flights to, from, and between European Union airports in the EU Emissions Trading System (ETS). A proposed directive by the European Commission to the member states and the European Parliament would require inclusion of only the portions of flights that take place in EU airspace to be included in the ETS. The directive would amend the ETS to include international flights by foreign airlines. Although not as burdensome as the original plan, it is possible that Indian, Chinese, Russian, and Unites States’ based airlines will still refuse to comply.

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

Special thanks to Sullivan & Worcester’s Emma Spath, Environmental Intern, for assistance in preparing this post.

ICAO Council Compromises on International Aviation Emissions

Last week, the Council of the International Civil Aviation Organization (ICAO), a permanent body comprised of thirty-six ICAO members, met in Montreal to discuss international aviation emissions. This meeting proceeded the September 24 – October 4, 2013 meeting of the full ICAO membership. The Council agreed to a temporary framework that would allow regional emissions trading systems to regulate portions of flights in their airspace.  In contrast to the European Union’s (EU) earlier attempt to regulate the full distance of all flights taking off or landing in the EU, this new agreement would allow regulation only of the flight portion in EU airspace. This agreement fell short of what many had hoped for – the adoption of a global, market-based system to reduce carbon emissions. The Council did agree, however, that such a comprehensive international plan would be secured by 2020. The agreement still must be approved by the full ICAO membership later this month at the Assembly.

In the end, the agreement is a compromise between the EU, which desires stronger emissions standards, and countries such as the United States and China, who have pushed to find a global solution. Hopefully, the Council’s decision will keep the peace until a global management plan is developed.

 

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

Report Pushes ICAO Towards Market-Based Measures to Address International Aviation Emissions

As we have previously discussed, the 38th Session of the International Civil Aviation Organization (ICAO) Assembly is set for September 24 – October 4, 2013. On the agenda is how and when to address international aviation emissions. In preparation for this meeting and to provide information to policymakers, Manchester Metropolitan University’s Center for Aviation, Transport, and the Environment (CATE) released a report, Mitigating Future Aviation CO2 Emissions: Timing is Everything, on August 27, 2013. This paper concluded that market-based measures, rather than alternatives such as biofuels or efficiencies, are the most cost-effective methods of mitigating emissions and climate impacts. This is because market-based measures, such as carbon emissions trading, have the potential for immediate reductions in emissions while the world must wait for improved technologies. If such market-based measures can be successfully implemented by ICAO, it would avoid reinitiating the battle between the European Union (EU) and other countries over the regulation of all flights originating or landing in the EU by the Emissions Trading System (ETS).

The CATE report can be found here. As this issue progresses, please check back to this blog for future posts.

ICAO Considering Global Carbon Emissions Offset Program that Requires Funding Emissions Reducing Projects

Late last month, executives gathered in London for the Aviation Carbon 2013 summit. A few themes developed from this summit.  Among the themes was that  any adopted carbon emissions offset program must show a verifiable difference to the health of the environment, and that any carbon emissions offset program must be simple to join.  Discussion also concentrated on the International Civil Aviation Organization's (“ICAO”) meeting in September 2013.  As we reported earlier in this blog, in November 2012 the European Union suspended the inclusion of the non-EU aircraft industry in the EU Emissions Trading Scheme (“EU-ETS”) for one year until ICAO had an opportunity to develop a global consensus on a plan to reduce emissions.  The September meeting of ICAO's High-Level Group on International Aviation and Climate Change is that opportunity. 

The working group is reviewing at least three market-based mechanisms:  (No. 1) a carbon emissions offset program that requires the funding of projects that reduce carbon emissions; (No. 2) a carbon emissions offset program similar to that proposed in No. 1, but with an additional revenue mechanism, most likely a tax; and (No. 3) a global carbon emissions cap-and-trade system.  It has been reported by news outlets after the Aviation Carbon 2013 summit that the mechanism showing the most promise is No. 1, which will require participants to engage in carbon offset projects such as those that support renewable energy, promote reforestation, avoid deforestation, and boost energy efficiency.  If the working group fails to come to a consensus, then we could see a stand-off again between the EU and the non-EU aircraft industry on this controversial measure.

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

Aviation Groups Support Measures to Halt EU-ETS

Last week, the National Business Aviation Association (“NBAA”) continued its support for increased pressure and direct measures that would curb efforts of the European Union to include the U.S. aviation sector in the EU’s Emissions Trading Scheme (“EU-ETS”). The NBAA joined forces with 18 other aviation-related associations in an advocacy coalition. The coalition sent President Obama a letter requesting that an Article 84 legal action be pursued at the International Civil Aviation Organization (“ICAO”). An Article 84 action refers to a dispute resolution mechanism that all ICAO members agreed to at the 1944 Chicago Convention. NBAA’s press release, including a copy of the letter can be found here. This message may have been in response to an earlier letter sent to President Obama by a coalition of environmental advocacy groups. In August 2012, the environmental coalition requested that the President not “give in” to pressure from the U.S. aviation industry to take legal action.

In another press release last week, the NBAA affirmed its approval of the U.S. Senate’s final passage of Senate bill S. 1956 entitled the “European Union Emissions Trading Scheme Prohibition Act.” As we have posted before, S. 1956 prevents all U.S. aircraft operators from complying with the EU-ETS and authorizes the Department of Transportation and Federal Aviation Administration to negotiate a universal approach to address aircraft emissions. This bill must now be reconciled with an earlier bill (H.R. 2594) that passed the U.S. House of Representatives in October 2011 and be signed by President Obama. Industry leaders believe the bill could be taken up in the House as earlier as the week of November 12, 2012. NBAA’s press release can be found here.

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

EPA Brings NOx Emissions Regulations for Commercial and Non-Commercial Civilian Aircraft Engines in Line with ICAO Standards

Late last month, EPA adopted new nitrogen oxide (“NOx”) emissions standards for aircraft engines that align with international requirements previously promulgated by the International Civil Aviation Organization (“ICAO”). According to the Final Rule [77 Fed. Reg. 36342], the regulations reduce NOx emissions from taxiing, take off, landing, idling, and flight for certain gas turbofan engines used by commercial and non-commercial civilian aircraft with maximum rated thrusts greater than 26.7 kilonewtons (“kN”). Although engines with this rating are primarily used in the commercial sector, the rule makes clear that the standards also apply to non-commercial civilian aircraft engines that are required to obtain airworthiness certificates.

Prior to this rule, gaseous emissions regulations were limited to commercial civilian aircraft engines. The inclusion of non-commercial aircraft engines, according to the Final Rule, was because ICAO’s standards and recommendations already apply to both sectors. This rule, therefore, brings EPA’s regulations into full conformance. Further, manufacturers already certify the engines to the international standards, thus “this provision simply incorporates the status quo.” Finally, the inclusion was necessary because of the physical and operational similarities between the aircraft engines used in the two sectors.

To facilitate an orderly transition, EPA adopted two tiers of emissions standards: (1) Tier 6 (or CAEP/6) standards and (2) stricter Tier 8 (or CAEP/8) standards. Implementation of the Tier 6 standards will result in a 12 percent reduction in emissions levels below the current Tier 4 standards. The Tier 8 standards will result in a 15 percent reduction in emissions levels below the Tier 6 standards. The applicability of the tiers depends on the manufacturing date and certification date of the engine model.   

  • Tier 6 Standards: If the engine model is manufactured and certified before July 18, 2012, the engine model would not be required to comply with the Tier 6 standards until December 31, 2012. Any engine model certified on or after July 18, 2012, must comply by December 31, 2013.
  • Tier 8 Standards: Any engine model certified on or after January 1, 2014, must comply with the Tier 8 standards. 

The Final Rule also includes several changes that affect all aircraft gas turbine engines subject to current emission requirements. The Final Rule:

  • clarifies when a design variation of a new engine causes the latest version to become different enough from its previously certified parent engine that it must conform to the most current emissions standards;
  • amends the emission measurement procedures to reflect current certification practices; and
  • requires covered gas turbine and turboprop engine manufacturers to report emissions data to EPA to conduct analysis and define appropriate public policy.

According to EPA, this rule “is not an economically significant regulatory action” and “will impose no real additional burden on engine manufacturers” because aircraft turbofan engines are already designed and built to ICAO standards in order to be sold and operated worldwide. Overall, only ten engine manufacturers will be affected by this rule. EPA estimates that the total annual burden of compliance is approximately ten hours and $365 per manufacturer. 

This is not the first time that EPA has revised its standards for aviation emissions to conform to ICAO guidelines, nor will it be the last. As covered extensively in several previous posts, if ICAO develops universal and comprehensive standards for aviation greenhouse gas emissions, EPA may soon revise its regulations to follow suit.  

More information on the new NOx standards can be found on EPA’s website.

Special thanks to Sullivan & Worcester’s Noah Tomares, Environmental and Marketing Intern, for assistance in preparing this post.

ICAO's Release of a Draft Market-Based Emissions Reduction Measure has been Delayed until March 2013

The International Civil Aviation Organization (“ICAO”) aims to have a draft global plan to reduce aviation emissions completed by March 2013, not by the end of 2012 as previously planned. ICAO is considering four market-based alternatives. One is mandatory offsetting of emissions from airlines, while another is mandatory offsetting with some revenue-generating mechanism. There are also two cap-and-trade systems under discussion; one would allow all aviation emissions to be traded, while the other would only allow increases and decreases from a predetermined baseline to be traded. Secretary-General Raymond Benjamin said he hopes to finalize one plan next March 2013, with the ultimate goal of presenting it at ICAO’s triennial meeting in the fall of 2013. (Reuters)

This delay only exacerbates the current deadlock between the European Union and the non-EU countries that stiffly oppose inclusion in the EU emissions trading system. It is imperative that ICAO stick to this timetable, or it may risk an escalation of the conflict and a possible trade war.

Special thanks to Sullivan & Worcester’s Joshua Walfish, Marketing Intern, for assistance in preparing this post.

Panel Provides Unique Perspectives on EU-ETS's Affect on the Commercial and Non-Commercial Aviation Industry

Last Thursday at the 11th Annual Aviation Summit in Washington, DC, a highly informative expert panel was convened to discuss the ever-so-controversial European Union Emissions Trading Scheme (“EU-ETS”). The panel members were:

  •  Nancy Young, Vice President, Environmental Affairs, Airlines for America;
  • The Honorable Julie Oettinger, Assistant Administrator for Policy, International Affairs and Environment, Federal Aviation Administration;
  • Felix Leinemann, Transport Counselor, Energy, Environment and Nuclear Matters, Delegation of the European Union to the United States; and
  • Edward M. Bolen, President and Chief Executive Officer, National Business Aviation Association.

The panel was moderated by Stephen D. Eule, Vice President for Climate and Technology, U.S. Chamber of Commerce’s Institute for 21st Century Energy, and was preceded by a keynote address from Ambassador Duane Woerth, representative to the Council of the International Civil Aviation Organization (“ICAO”). To better understand the conflict regarding the ETS, Ambassador Woerth explained that the United States and the European Union have had different focuses post-9/11. While the U.S. has been focused on security in the aviation industry, the EU has been more focused on climate and environmental issues, such as reducing emissions and noise pollution.

Although the panel members were at odds on most issues, they did find some common ground. All were of the opinion that most aviation industry leaders agree that emissions should be curbed to reduce their effects on climate. Opinions diverge, however, on the most appropriate vehicle to achieve this goal.  

Mr. Leinemann, the sole representative from the EU, delivered its point of view. From the EU’s perspective, the ETS is a “stepping-stone” to a global approach that already has garnered agreement from the EU’s 30 member states, all of which are willing to integrate their individual trading schemes. It is true that the EU prefers a global solution; however, because the EU views the ETS as a building block, it will not back down from its position that the ETS must move forward. 

Non-EU countries, however, do not see this controversy as one about aircraft greenhouse gas (“GHG”) emissions; rather, they see the dispute as one about national sovereignty and violation of international law. These countries view the ETS as an unilateral tax placed on them by the EU. 

In contrast to the EU’s views, the U.S. Federal Aviation Administration (“FAA”) views the ETS as an impediment to progress, and finds it difficult to reconcile the EU’s support of a global solution and its steadfast position not to repeal the ETS. In defense, Mr. Leinemann drew an analogy to the legislative inter-workings of the U.S. Congress and asked the Summit participants to imagine the difficulty in repealing legislation that enjoyed almost unanimous support in both the European Parliament and the Council of the European Union.

Non-EU countries have other concerns, as well. One concern involves the money that will be collected for the carbon emissions credits. According to Mr. Leinemann, the money will be used for emissions mitigation projects, particularly in developing countries. Ms. Young stated that the money paid to the EU could be used for such projects, but it is not mandatory. In fact, the United Kingdom has publicly stated that it would not “earmark” the funds. Another suggested likely scenario would be that non-EU airlines would have to buy carbon credits on the open market. EU businesses could use the money for energy-efficiency projects, all funded on the “backs” of non-EU airlines. 

When asked what it would take to satisfy the EU, Mr. Leinemann offered that the EU would like to see visible and irreversible progress from ICAO that includes all major emitting countries and sets GHG emission reduction targets that go further than the current ETS. However, non-EU countries take issue with the fact that the EU has not provided any guarantees that it would adopt such a global solution, even if one is worked out by ICAO members.

Mr. Bolen delivered the perspective of the non-commercial aviation industry. In the EU, small emitters are eligible for waivers of ETS requirements; however, there are no such waivers for corporate/business aircrafts. Neither is the non-commercial aviation industry eligible to receive the carbon credits that would be free to other ETS participants. According to Mr. Bolen, business aircrafts would be required to buy credits for each and every flight, thus placing a severe financial strain on the industry. Further, the administrative burden to comply is high. The non-commercial aviation industry does not have the same resources as the commercial industry to track emissions and achieve compliance.

As noted in earlier posts, ICAO is currently working on a global solution; however, no mandatory deadline has been established. One option for a quicker resolution is for the U.S. to file a challenge against the EU under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO Rules for the Settlement of Differences. According to Ms. Young and Ms. Oettinger, this challenge would effectively turn this into a judicial dispute requiring resolution by ICAO’s permanent Council. Such a situation is not without precedent. In 2000, the U.S. used a similar challenge to protest EU regulations to reduce noise pollution that effectively prevented U.S. aircrafts using “hush kits” to fly in Europe. The EU ultimately repealed this legislation two years later. A “roundtable” on pursuing this option was held on March 28, 2012 before the House aviation subcommittee. According to Ms. Oettinger, at this time, the FAA has not decided whether to bring such a challenge.

Even if ICAO crafts an acceptable global solution that is adopted at the next governing conference in September 2013, and, importantly, the EU finds the solution acceptable and repeals the ETS, the U.S. aviation industry still must bear the administrative burden and cost of tracking, collecting and submitting emissions data for the years 2012 and 2013. Thus, questions would remain regarding who will pay for these administrative costs; and does this make an Article 84 challenge the next logical step?

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

Recent Statements Highlight Difficulty in Achieving a Global Compromise on Aviation Emissions Regulation

Since taking effect on January 1, 2012, the European Union Emissions Trading Scheme (“EU-ETS”) has continued to be a hot button issue among the international aviation community. As such, much of the recent content of this blog has been devoted to covering this unfolding issue, including the following posts:

Global aviation emissions negotiations are ongoing at the International Civil Aviation Organization (“ICAO”), however, each side of the question has taken a hard-line position which could make a compromise difficult or even unrealistic. Late last month, representatives from more than 20 non-EU countries, including the Russian Federation, the United States, India, China, and Japan met in Moscow, Russia in an informal “coalition of the unwilling” to protest their inclusion in the EU-ETS and to discuss measures to counteract its effects. The meeting resulted in a signed declaration that each country would consider a variety of actions including strongly urging the ICAO to adopt a multilateral approach toward international civil aviation emissions, barring their country’s aircraft operators from complying with the EU-ETS, and/or imposing levies/charges on EU aircraft operators. The joint declaration can be found here, as communicated by the Russian Federation. Continued discussions are planned for this summer in Saudi Arabia. Although most believe that the rhetoric of the Moscow joint declaration was “less aggressive” than previous draft statements, it may be enough to create momentum toward a global solution to this problem.

This month, a joint announcement was released by Airbus and eight other EU aviation companies stating that the current situation is “intolerable” and that threatened retaliation will have serious negative effects on the EU aviation industry. Airbus, Air Berlin, Air France, British Airways, Iberia, Lufthansa, MTU Aero Engines, Safran, and Virgin Atlantic all called for a global compromise facilitated through the ICAO. Shortly after its release, Connie Hedegaard, the EU’s Climate Action Commissioner, applauded the statement as creating more pressure for global action to regulate aviation emissions. The Office of the EU’s Climate Action Commissioner has preferred a global consensus approach, but has publicly and steadfastly held its position to move forward with the ETS despite the dissidence from non-EU countries.    

Among the aviation industry, the greatest concern is a resulting international trade war. China, for example, has reportedly told its airline operators to not cooperate in the EU-ETS and has suspended $12 billion worth of aircraft orders with Airbus, placing thousands of jobs at jeopardy. Reports indicate that India is contemplating a similar stance. As demonstrated by the Moscow joint declaration, this could just be the tip of the proverbial iceberg as other countries are considering similar countermeasures and further retaliatory restrictions on EU aircraft operators. The EU aviation industry is worried, and with good reason, that other important markets will follow in China’s footsteps.

The ICAO has established a dedicated working group, consisting of five member states and the International Air Transport Association (“IATA”), to study the issue and propose a global framework for international aviation emissions by the end of 2012, so that it can be adopted at the next IATA governing conference in September 2013. The ICAO may create any type of international regulation system, however, a compromise may come from one of two clauses in the 2008 law (2008/101/EC) that allow for the ETS to be easily modified. First, flights into the EU could be exempt from the ETS if emissions-reducing measures are in place in the country of departure. Second, if equivalent measures to the ETS are put in place in the country of origin, then airline operators may be exempted. However, as indicated by the recent difficulty in approving a successor to the Kyoto Protocol, a global environmental agreement on aviation emissions will be difficult to reach among the ICAO’s 190-plus members.

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

 

Special thanks to Sullivan & Worcester’s Michael Karp, Business Development and Marketing Intern, for assistance in preparing this post.

UBS Report Could Spell the End of the EU-ETS

According to a recent article in The Australian, “Europe’s $287bn Carbon ‘waste’: UBS report,” Swiss banking giant UBS reported that the European Union’s Emissions Trading Scheme (“EU-ETS”) has cost the continent’s consumers $287 billion in exchange for a negligible impact on cutting carbon emissions, and as a result its carbon trading market is on the verge of collapse. The report claims that had the funds been part of a targeted approach to replace the European Union’s dirtiest power plants, emissions could have been reduced by 43 percent.

This report is yet another blow to the EU-ETS as worldwide opposition to the scheme grows, especially in the aviation industry. As reported in the article on the National Business Aviation Association website entitled, “Report: EU-ETS Will Be Costly, Have Minimal Emissions Impact,” the International Civil Aviation Organization (“ICAO”) has adopted a white paper from 26 nations including the U.S. and Canada urging the EU to omit its air operators from complying with the EU-ETS. Further, as posted earlier on this blog, the U.S. has made moves to legislatively prevent U.S. airlines from participating in the EU-ETS. Actions like these could cripple the EU-ETS and signal the end of the scheme as a whole.

The bank’s findings add even more uncertainty to the overall ability to implement an international carbon trading market. The report came at a time when the U.S. announced it would forgo its own cap-and-trade system, Canada became the first country to withdraw from the Kyoto Protocol, and the Durban, South Africa Climate Talks ended with a non-binding agreement that will not be implemented until 2020. As this issue progresses please check back to this blog for further posts.

Special thanks to Sullivan and Worcester’s Michael Karp, Business Development and Marketing intern, for preparing this post.

EPA Publishes Nitrogen Oxide Emissions Standards for Aircraft Engines in the Federal Register

As a follow-up to our July 14, 2011 post entitled “EPA Proposes Rule to Set Standards for Nitrogen Oxide Emissions From Aircraft Engines,” on July 27, 2011 the Environmental Protection Agency (“EPA”) published the proposed rule setting nitrogen oxide emissions standards for aircraft engines in the Federal Register (76 Fed. Reg. 45,012). The United Nations’ International Civil Aviation Organization (“ICAO”) has previously endorsed the emissions standards and engine manufacturers have begun conforming to the published standards. The EPA believes that the emissions standards will reduce nitrogen oxide emissions at takeoff and landing by 100,000 tons between 2014 and 2030.

The rule’s release date was July 6, 2011 (130 DEN A-7, 7/7/11) and the EPA will accept comments on the proposed rule through September 26, 2011 at Regulations.gov (Docket Number: EPA-HQ-OAR-2010-0687). A public hearing will be held on August 11, 2011 at the Sheraton Chicago O’Hare Airport Hotel in Rosemont, Illinois at 9:30 a.m. As this issue progresses, please check back to this blog for future posts.

 

Special thanks to Sullivan & Worcester's Ari Hoffman, environmental intern, for assisting in the preparation of this post.