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Regulatory Hot Topics

Business Aviation Grapples With EU-ETS Implementation

Don Spruston, director general of the International Business Aviation Council (IBAC), which represents business aviation interests worldwide, recently used the analogy of watching a car wreck in slow motion when talking about last year's events leading up to the planned January 1, 2012, implementation of the European Union's Emissions Trading Scheme (EU-ETS).

As the deadline loomed, Spruston watched as EU regulators crashed head-on with officials from nations around the world, who had expressed vocal opposition to the ETS program. In response to those protests, EU officials continued to insist on a stiff carbon tax on civilian flights operating over the region.

As just one point of dispute in the conflict, opponents are enraged that the EU-ETS tax is based on the amount of carbon emitted from the aircraft's point of origin, rather than the point at which it enters EU airspace.

The issue alarmed Paul Anderson, vice president, UTF light for United Technology Corporation (UTC). Anderson was more than merely an interested observer of the growing international dispute developing around EU-ETS.

"The real fear on my part is, if we don't comply, we could face severe penalties," Anderson said. "We're trying to see if we have carbon credits from other parts of the company that we might apply to our flight operations."

Washington Weighs In

As the business aviation community became increasingly concerned last fall over the potential impact of EU-ETS implementation on its operations, Congress moved to prohibit all U.S. aircraft operators from participating in the program. The "European Union Emissions Trading Scheme Prohibition Act of 2011" easily passed the House of Representatives in October, and was greeted with applause from several aviation organizations, including NBAA.

There is agreement among [ICAO] member states that there should be a market-based program. Don Spruston Director General, IBA

As of this writing, the Senate had yet to approve the legislation, so that it could ultimately be sent to President Obama for his signature. But observers agreed that if the legislation does become law, the stage might be set for an ironic twist – that is, the distinct possibility exists that the EU-ETS could be in effect, even as U.S. law prohibits participation in the program.

Atlanta-based international trade attorney Damon Pike suggested that, under such a scenario, the ban on U.S. operators' participation in EU-ETS could wind up raising more questions for operators than providing answers.

"In sum," Pike stated, "the problem which the current legislation seeks to address could probably be better addressed through trade negotiations – painfully slow though they may be."

That notion intrigued UT C's Anderson. "I wonder if that kind of saber-rattling would bring the EU to the negotiating table?" Anderson asked.

Pike agreed that the congressional threat to prohibit operators registered in the U.S. from participating in EU-ETS might be enough to prompt European regulators to seek a consensus, but he expressed his hope that such a move would be greeted by U.S. officials with diplomacy rather than dictates. "Skillful negotiation is the way out of this conundrum, not ill-conceived legislation," he said. Pike's observation begs a question: What kind of forum would be ideal for such a negotiation?

Enter ICAO

The International Civil Aviation Organization (ICAO), a wing of the United Nations charged with setting global aviation policy, is widely regarded by both sides in the EU-ETS debate as the one body that might be able to bring a consensus-based solution to the dispute.

Officials within the European community have repeatedly lashed out at ICAO for not moving fast enough on implementing the kind of market-based emissions standard preferred by the 36 European member states. IBAC's Spruston said ICAO is moving toward such a consensus, but suggested it could be 2014 before an agreement is reached.

"There is agreement among the member states that there should be a market-based program," he remarked. "But at this time, there hasn't been an agreement on what that standard should be."

As the situation continues to unfold, IBAC's Spruston, UTC's Anderson and Steve Brown, NBAA's senior vice president, operations & administration, all agree 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."

Anderson said his company has already allocated $33,000 for EU-ETS implementation in 2012, an added cost that has placed a tremendous burden on his operating budget. "What else can you do?" he said. "We are complying. We have no choice."

But what if the U.S. passes its legislation prohibiting flight operators from participating in EU-ETS?

"I guess the only answer would be not to fly over there," Spruston mused. "But then, that's really not the answer." "It's really unclear what a successful outcome will be for a global approach" to EU-ETS , Brown said. "It has every appearance of a standoff."

For More Information

Get the latest EU-ETS news and developments at www.nbaa.org/eu-ets.

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