European Union Emissions Trading Scheme (EU-ETS)

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In 2011, No Clear Resolution on EU-ETS

January 2, 2012

Note: This is the third and final installment in a series of NBAA Flight Plan podcast reports looking back on major events affecting business aviation during 2011.

With the advent of 2012 comes Europe's implementation of one of the most controversial programs in the history of civil aviation. In an attempt to curb generation of greenhouse gases, the European Union put into effect its Emissions Trading Scheme (EU-ETS) on New Year's Day.

Under the EU-ETS program, the European Union taxes aircraft carbon emissions at a fixed rate. Companies that take steps to curb their emissions are granted tax credits which, are then traded on the open market. On January 1, 2012, Europe moved ahead with its plan for taxing emissions, but NBAA Senior Vice President Steve Brown suggested EU-ETS pits Europe against the rest of the world because it reaches beyond the borders of Europe itself.

"A flight that originates in the United States and is going to land in Europe – let's say in Paris or in London – is going to have to pay a carbon tax for its emissions over the entire length of the flight," Brown said. "Even though it's only in European air space for about ten percent of the flight, it would have to pay the tax based on the length of the entire flight."

In practical terms, that could mean aircraft from the United States with the range to make the trip without interruption might instead make an intermediate stop for the sole purpose of reducing the impact of the EU's carbon tax.

That scenario is all but a reality for Paul Anderson, Vice President for aviation management at United Technologies Corporation, which operates aircraft that often make several trips to Europe each month.

"If I'm coming from Houston and I want to go to Paris, even though I'm flying an airplane with a range of 7,000 miles, I'm going to stop artificially so I'm not charged with all those miles according to the EU program," Anderson explained.

As implementation of EU-ETS loomed ever closer in 2011, global criticism continued to rise. China vowed to file suit. Russia promised to retaliate with a surcharge on all European operators flying in its air space. In the U.S., Congress moved to prohibit any American-flagged operator from participating in EU-ETS.

The European Union Emissions Trading Scheme Prohibition Act of 2011, sponsored by Transportation and Infrastructure Committee Chairman John Mica (R-FL), sailed through the House of Representatives in the fall. In December, a similar measure was introduced in the Senate. In addition to prohibiting operators from participating in EU-ETS, it also directs the FAA Administrator to do everything possible to block implementation of the program as it pertains to U.S. flights.

NBAA, along with other aviation groups, has repeatedly voiced strong opposition to the ETS. Many of the groups have called for urgent action to prevent a disruption of both trade and tourism they believe could be at hand as the political conflict over EU-ETS continues to heat up.

NBAA joined in a legal challenge, led by Airlines for America, a legal challenge questioning the applicability of EU-ETS to owners and operators of aircraft based in the U.S. In December, the European Court of Justice said European authorities are authorized to obligate all operators, including the airlines and general aviation, to comply with the program. The groups supporting the legal challenge strongly objected to the ruling, and considered options for an appeal.  

Countries outside the EU said because the plan taxes flights for segments outside the European Union, it violates the 1944 pact, produced by the International Civil Aviation Organization (ICAO), giving each nation sovereignty over its own skies.

Late last year, the ICAO's Governing Council adopted what became known as the "New Delhi Joint Declaration," an international rejection of EU-ETS.

 

European regulators responded to the declaration by reaffirming their plan to move ahead with the program. "It is disappointing that ICAO discussions once again focus on what States should not do instead of what they should do to curb growing aviation emissions," said EU Climate Action Commissioner Connie Hedegaard. She promised that the ICAO declaration would not stop attempts to include aviation activities under the auspices of EU-ETS.

 "There is agreement within ICAO and within most ICAO member states that there should be a market-based program," explained Don Spruston, executive director of the International Business Aviation Council (IBAC). "There should be international standards established by ICAO. But at this time, there hasn't been an agreement on what that standard should be."

As 2011 drew to a close, IBAC's Spruston, NBAA's Brown and UTC's Anderson all agreed that, for the moment, there is only one solution for NBAA members operating in European airspace: obey the law.

"I think you just keep doing what you have been doing," said Brown. "Continue complying with monitoring and verification requests. Let the legal and diplomatic maneuvering play out."

For EU-ETS compliance resources, information on the history of the program, news about NBAA's advocacy efforts on the issue and other information, visit the EU-ETS page on NBAA's web site.

NBAA Flight Plan Podcast "In 2011, No Clear Resolution on EU-ETS"