ATA Letter to Senator Boxer on Cap and Trade

July 14, 2009

The Honorable Barbara Boxer
Chairman
Senate Environment and Public Works Committee
410 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Boxer,

For many years, you have been voicing concerns about the impacts that human activity is having on the world’s climate through the release of greenhouse gases (GHGs) into the atmosphere, and have long advocated federal action to address this important issue. Through such leadership, a solid testimonial and scientific record has been established that indicates the world climate is warming and that human-caused emissions of CO2 and other GHGs are a contributing factor in that warming. The science indicates that the impacts of a significantly warmer planet would be insidious and severe, dramatically affecting life on our planet.

It is through this lens that I write to you today. The evolution of the aviation industry has changed the world in ways unimaginable only a century ago. The global access that this vital industry provides to travelers and the speed and efficiency by which it delivers people and goods around the world are remarkable and act as critical drivers of economic growth.

But we recognize that commercial aviation in the United States and across the globe does not exist in an environmental vacuum. Although the U.S. airlines contribute only 2 percent of GHGs to our nation’s GHG inventory and the world’s airlines contribute only 3 percent of all worldwide GHG emissions, aviation undeniably emits CO2 and we, as an industry, must be willing to do our part to address this issue and to protect our planet. We acknowledge this fact and stand ready to work with you on this issue.

First, authorizing and funding a modernized, 21st century air traffic control (ATC) system would be the most productive step that Congress could take to complement the airlines’ initiatives to continue our strong record of fuel and GHG efficiency and to reduce the GHG footprint of aviation. Many successive administrations have failed to make this a priority. As a result, we are still using extremely outdated technology that limits our efficiency, drives up costs and emissions, contributes to congestion and flight delays and hampers our many efforts to build an even safer air traffic system. The creation of a new, state-of-the-art ATC system is a vital component in reducing human-caused GHG emissions.

Outside of ATC modernization, certain of the other measures Congress is considering to deal with global warming would actually hinder aviation’s ability to reduce GHG emissions. The approach that the House of Representatives has taken toward regulating GHG emissions through H.R. 2454 (the American Clean Energy and Security Act of 2009) falls into this category – it actually makes it harder for us to reduce GHG emissions and will result in more emissions from our sector over the next several decades than would be the case if Congress did not act on this issue.

This is true for a host of reasons:

• Today, fuel is the airlines’ largest cost center and we have every incentive to continue to reduce our fuel burn – and emissions. We have no need for artificial constructs that increase its cost. In 2008, our industry spent almost $60 billion on fuel alone: the size of our fuel bills often mean the difference between profitably and loss in any given year. This fact makes us fanatical about increasing fuel efficiency and reducing fuel burn – and thereby GHG emissions. We do this by spending money – purchasing new aircraft, acquiring new engines, installing advanced avionics, retrofitting airframes with winglets and other efficiency enhancers – and H.R. 2454 will pull billions of dollars out of our industry that it would otherwise use to continue these advances.
• We have shown that we will continue our march toward efficiency even if fuel is less expensive. On a passenger- and cargo-mile basis, the U.S. airlines have improved their fuel efficiency by more than 110 percent since 1978, resulting in fuel and GHG savings roughly equivalent to taking 18.7 million cars off the road each year. In absolute terms, we burned 3 percent less fuel – and emitted 3 percent less carbon – in 2007 than we did in 2000, despite hauling 20 percent more passengers and cargo. This progress has been steady and constant regardless of whether a barrel of crude oil was selling at $15 or $140. In our industry, artificially increasing the cost of fuel is not necessary to prod us into action. Indeed, our carriers committed to and are on track to improve their fuel- and GHG-efficiency another 30 percent between 2005 and 2025, which will result in an additional 1.2 billion metric tons of CO2 savings.
• We no longer have any low-hanging fruit to improve our efficiency. Because we have been so committed to efficiency increases for the past several decades, all of the easy fixes have been implemented. Airlines no longer have any simple or obvious efficiency improvements available to them to improve efficiency. The steps that are still available to be taken with our aircraft and operations will be hugely expensive, producing small, incremental benefits.
• A country-by-country patchwork of inconsistent and overlapping GHG regulation schemes simply does not work for commercial aviation.
• Commercial aviation is among the most international of all industries. Creating a country-by-country patchwork of regulations for GHGs is unfair, unworkable and unnecessary. Without a unified international regulatory approach, U.S. airlines will eventually be subject to a global hodgepodge of complex, disjointed, inharmonious GHG-reduction mandates that will be virtually impossible to track or reconcile and will almost certainly have us paying repeatedly for the same carbon emissions. This can already be seen in the European Union emissions trading mandates. The EU has approved a scheme that would tax U.S. carriers for all of the fuel they use to fly into any EU airport – regardless of where on the planet that fuel was purchased or burned. Adding a Waxman-Markey cap-and-trade program in the United States would mean double-taxation for U.S. airlines flying to Europe.
• To the extent aggressive foreign carriers are not subject to the same GHG-related expenses as U.S. carriers, domestic providers are put at a severe economic disadvantage to foreign airlines, many of which are already subsidized by foreign governments.
• As it pertains to commercial aviation, H.R. 2454 will promote the development of such a patchwork and its added costs will actually be counterproductive to the ultimate goal – reducing airline CO2 emissions. This is true because it will siphon billions of dollars per year away from aviation – money that we would otherwise use to invest in new avionics necessary to equip our aircraft for a modernized ATC system and to buy new, more efficient aircraft and engines. The predominant factor that has driven the ATA airlines’ tremendous fuel and GHG efficiency records has been the airlines’ own investment in new technology. In fact, the Federal Aviation Administration (FAA) has acknowledged that the airlines’ work with the manufacturers in driving and deploying technology advances accounts for more than 90 percent of the emissions improvements achieved. H.R. 2454 impedes this unnecessarily.
• Airlines currently have no available alternative to petroleum fuels to power their aircraft. Unlike other industries, airlines today cannot simply switch fuels to mitigate the impacts of H.R. 2454. (In contrast, dozens of fuels currently exist that can spin a turbine and generate electricity, many with zero carbon emissions.) For obvious reasons, aviation fuels must meet exacting standards and be subject to extensive and rigorous testing before they are approved, and no such alternative fuels exist today. We are driving the effort toward commercially viable, environmentally friendly alternative fuels through groups like the Commercial Aviation Alternative Fuels Initiative (CAAFI), but viable, commercial-scale production of alternative jet fuel is still some years away.
• The bill does not contain adequate transparency regarding the pass-through of cap-and-trade costs. H.R. 2454 would cover the airlines “upstream,” as fuel producers and importers would be required to cover the fuel they sell to airlines with sufficient emissions allowances to cover the GHGs from the fuel once burned. As airlines have no choice but to purchase the fuel if they want to fly, the fuel producers and importers will simply pass along the costs of the allowances to the airlines. And yet, the airlines will have no way to discern how oil companies are paying for emissions allowances and how they are passing those costs on to users like aviation. Without additional transparency mandates, oil companies could extract a premium from our industry for jet fuel. Moreover, as “uncovered” (or more aptly “indirectly covered”) entities under the bill, airlines are not in line to receive any of the millions of tons of free allowances that H.R. 2454 would provide to other effected industries to cushion the economic blow.
• Airlines simply cannot pass increased fuel expenses on to our consumers. The demand for air travel is highly elastic; when the cost of flying increases, airlines lose customers. Our inability to pass along all of these costs was clearly borne out by last year’s oil price spike, the primary cause of the almost $10 billion loss our industry suffered last year.

Again, while only responsible for a small portion of GHG emissions, U.S. carriers acknowledge that GHG emissions pose a real environmental threat. Accordingly, we are committed to contributing to a solution. The most effective, equitable, practicable solution is to subject U.S. aviation to provisions being devised by the International Civil Aviation Organization (ICAO), which will regulate emissions from commercial aircraft worldwide.

ICAO, established by treaty at the Chicago Convention of 1944, is the United Nations body charged with setting global standards and recommended practices for international aviation. Recognizing that international, mobile sources such as aircraft cannot be addressed the same way as stationary sources, the 1997 Kyoto Protocol expressly defers to ICAO to come up with a uniform global GHG emissions scheme for aviation. ICAO is the logical entity to regulate GHG emissions from commercial aircraft. Its 190 country-members are charged with ensuring that the regulation of GHG emissions is fair and uniform around the world for all carriers.

For the past several years, ICAO has been working on a global scheme to regulate GHG emissions from civil aircraft that is fair and equitable to all aviation interests around the globe. Among its accomplishments to date, it commissioned the first, and only sector-specific analysis of GHGs by the Intergovernmental Panel on Climate Change (IPCC), prepared and published state-of-the-art guidance on minimizing fuel burn and emissions and developed aviation-specific templates for voluntary agreements to reduce GHGs and emissions trading among mutually agreeing nations.

And ICAO forward-looking work in continuing. Specifically, the ICAO Council currently is considering the recommendations of its climate working group, which issued a draft plan of action in late May. The full ICAO is expected to adopt a policy position at a special high-level meeting scheduled for October, which will feed into the larger climate change negotiations. Thus, we anticipate continued progress on this front in the coming months and, as long as ICAO continues to work toward a completed framework for regulation, any GHG-reduction measures adopted by Congress should be structured to in a manner that places the regulation of GHG emissions from U.S. aircraft under the global framework ICAO is developing, rather than under a U.S.-only scheme. Indeed, even in approving H.R. 2454, the House of Representatives included a “Sense of the Congress” statement urging that Congress:

“Continue to actively promote, within the International Civil Aviation Organization, the development of a global framework for the regulation of greenhouse gas emissions from civil aircraft that recognizes the uniquely international nature of the industry and treats commercial aviation industries in all countries fairly; and

Work with foreign governments towards a global agreement that reconciles foreign carbon emissions reduction programs to minimize duplicative requirements and avoids unnecessary complication for the aviation industry, while still achieving the environmental goals.”

For these reasons, the airline industry urges you and your Senate colleagues to take a broader, more international approach to regulations pertaining to U.S. aviation that places us under a global framework, to ensure that our industry remains the fastest, safest, most efficient, reliable and affordable air transportation system in the world. Thank you. We stand ready to work with you to address these vital national issues.

Sincerely,

James C. May
President and CEO