EU ETS Remains Bad News For U.S. Airlines

As published in Aviation Daily on February 11, 2013


Make no mistake about it: the European Union Emissions Trading System (EU ETS) is bad news—for customers, airlines and, ironically, the environment. It is quite simply an exorbitant, extraterritorial cash grab for financially troubled European countries which under the law can use the money however they see fit.

Since 2009, U.S. airlines have spent millions of dollars to comply with EU ETS emissions monitoring and reporting requirements. If fully implemented, this scheme would cost the U.S. airlines an additional $3.1 billion by 2020. Siphoning away monies into EU coffers from airlines that need to continue investing in new aircraft, alternative fuels and operational improvements to continue their strong record of emissions reductions is wrongheaded.

In light of this, assertions like those made in “U.S. Airlines Could Profit From EU’s Decision To Stop 2012 Emissions Claim” (Aviation Daily, Feb. 4) are ridiculous. Simply put, there is no scenario under which U.S. carriers are making–or will make–money from the EU ETS trading scheme. Reports from European environmental groups perpetuating the myth that airlines will get a "windfall" through this regulatory tax scheme—essentially charging customers as if the free allowances the airlines get were not free at all—lack credibility, fact and a basic understanding of how airline economics work.

U.S. airlines lost $53 billion over the past decade—not exactly a windfall profit scenario. In practice, the airline industry has been unable to recover all of its costs for services to customers, let alone treat something they get for free as if it were a cost.

The airline industry is proud that its business model aligns with environmental interests and doesn’t need an exorbitant tax to incentivize the industry to go green. It is green and it's getting even greener. Nearly every credible economist has noted that airlines are already extremely fuel- and carbon-efficient and have no “low hanging fruit” to bring emissions below EU ETS target levels. Other industries around the world should look to the airlines as an example–U.S. airlines improved fuel efficiency by 120% between 1978 and 2011, saving 3.3 billion metric tons of carbon dioxide. There is no prospect for airlines to sell off any of the allowances they get for free; in fact, they are projected to be net buyers of allowances, not to mention that the free allowances would be needed to help mitigate the cost of the heavy-handed tax should the EU ETS be implemented on flights to and from the EU.

Nor is there an opportunity for airlines to profit from the one-year stay of the ETS. Notably omitted from the recent Aviation Daily article is the fact that U.S. carriers are required to return the allowances they received for international flights as a condition of qualifying for the stay.

EU ETS was rejected not only by the airlines; the Obama administration, aviation trade associations, manufacturers, labor unions, travel service providers and a strong, bipartisan majority of the U.S. Congress are vigorously opposed to it as well. Congress roundly rejected the EU ETS last year by passing a bill, which the president signed into law, authorizing the U.S. transportation secretary to prohibit U.S. aircraft operators from complying with the scheme.

A4A and its members are offering a better way forward. We are part of a worldwide aviation coalition supporting a global framework for emissions reductions at the international body that sets standards and recommended practices for international aviation, the International Civil Aviation Organization. Under this approach, all airline CO2 emissions would be subject to emissions targets requiring industry and governments to do their part, with a primary focus on getting further fuel efficiency and emissions savings through new aircraft technology, sustainable alternative aviation fuels and air traffic management and infrastructure improvements.

Not only will our program bring greater environmental benefit overall, it will do so in a way that supports U.S. businesses and the traveling and shipping public.

Nancy N. Young is VP for environmental affairs at Airlines for America, the industry trade organization for leading U.S. airlines.