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.