November 19, 2007
The Honorable Joseph Lieberman, Chairman
The Honorable John Warner, Ranking Member
Senate Subcommittee on Private Sector and Consumer
Solutions to Global Warming and Wildlife Protection
456 Dirksen Office Building
Washington, DC 20510
Dear Chairman Lieberman and Ranking Member Warner:
On behalf of the Air Transport Association of America, Inc. (ATA) and its member airlines, I write to share with you our concerns regarding S. 2191, “America’s Climate Security Act” (ACSA). As the principal trade and service organization of the major scheduled air carriers in the United States, ATA is actively engaged in addressing the environmental impacts of aviation.1 We take our role in controlling greenhouse gas (GHG) emissions very seriously and are committed to continuing to build on our strong record in this regard. We believe, however, that S. 2191 proposes the wrong approach for our industry. Specifically, as detailed below, application of S. 2191 to the commercial aviation sector is unnecessary, would be unduly punitive and inequitable and, ultimately, counterproductive.
A brief review of our significant fuel and GHG efficiency achievements provides context for the concerns we have with S. 2191. U.S. commercial aviation contributes about 2 percent of domestic U.S. greenhouse gas (GHG) emissions.2 At the same time, commercial aviation is critically important to local, national and global economies, enabling a large percentage of U.S. economic output. A March 2006 study by the Campbell-Hill Aviation Group found that “the national economy is highly dependent on commercial aviation, which is directly or indirectly responsible for 5.8 percent of gross output, 5.0 percent of personal earnings and 8.8 percent of national employment.”3 The study further noted that this translated into $380 billion in earnings, 11.4 million jobs and $1.2 trillion in U.S. output in 2004. Placing aviation’s economic output side-by-side with its GHG output clearly illustrates that commercial aviation is an extremely GHG-efficient economic engine.
We have been able to deliver such strong economic output while reducing our emissions by continually improving our fuel efficiency through reinvestment in technology and more fuel efficient operations. In fact, U.S. commercial airlines (passenger and cargo combined) have improved their fuel efficiency by 103 percent since 1978, which (given the one-to-one relationship between fuel consumption and carbon dioxide (CO2)) has resulted in commensurate CO2 emissions savings. The improvement in recent years has been particularly dramatic. FAA has confirmed that U.S. carriers burned 5 percent less fuel in 2006 than they did in 2000, resulting in absolute reductions in GHG emissions, even though they carried 12 percent more passengers and 22 percent more cargo.4 And the ATA members recently committed to an additional 30 percent fuel efficiency improvement (on a revenue ton mile (RTM) basis) between 2005 and 2025. Few, if any, other industries can match our achievements and forward-looking commitment.
It cannot be overemphasized that our own investments in technology and more fuel-efficient technology has been the predominant and indispensable ingredient in our success. Constantly upgrading aircraft and engines and acquiring new fuel-saving winglets and equipage to enable more efficient routings are just a few examples of the many, capital intensive programs our carriers have undertaken to improve. Future efficiency gains depend on our ability to continue investing in new technology.
We are not embarrassed that many of these environmental achievements have come as an economic imperative – in fact, the theory behind legislation such as S. 2191 is to provide a “price signal” to stimulate emissions reduction where the market is not doing so. In our case, however, the market already is and long has been providing that signal. Fuel is now the largest cost center for the airlines, averaging 20-30 percent of total operating costs, and long has been one of the two highest costs. Thus, the airlines have long been engaged in exhaustive efforts to conserve fuel and ATA has joined with FAA, the Department of Defense, airframe and aircraft engine manufacturers, airports, researchers, universities and others in the Commercial Aviation Alternative Fuel Initiative (CAAFI), whose mission is to bring commercially viable, environmentally friendly alternative jet fuel to fruition.
Against this backdrop, we are compelled to share our concerns about S. 2191. First, based on our fuel and GHG efficiency records and commitments noted above, application of the bill to commercial aviation simply is unnecessary. Second, the bill would, in effect, impose a punitive emissions tax on aviation, which would not only harm the economy but also would be counterproductive.
As drafted, the bill proposes to cover the transportation sector – including aviation – indirectly, through a cap-and-trade system “upstream,” which would require fuel producers to acquire allowances sufficient to cover the GHG content of the fuel they sell to the transport sector. Fuel producers will incorporate the cost of these allowances into fuel prices, passing the costs on to fuel consumers (including airlines) – in effect, operating as a fuel tax on jet fuel and other transportation fuels. This would have significant economic repercussions on the airline industry and the economy, as every penny increase in the price of a gallon of jet fuel drives an additional $190-200 million in annual fuel costs for U.S. airlines.
These increased costs would diminish the airlines’ ability to continue to achieve the tremendous fuel efficiency improvements and emissions reductions we have achieved within the industry and, therefore, would be counterproductive. FAA estimates that 90 percent of the efficiency improvement achieved within the industry comes from our continual reinvestment in newer aircraft and technology upgrades. To the extent that our dollars go to paying more and more for jet fuel, which already is at an all-time high in terms of costs, our ability to continue to invest in our own improvements will be compromised.5
Third, we have serious concerns regarding apparent inequities in the bill. As drafted, aviation fuel providers would have to cover 100 percent of the emissions targets for aviation fuels on day one and forever after, with no allowances provided up front. As airlines must have fuel to operate, our fuel suppliers would pass on these costs to us in full. In contrast, the bill would accord to several sectors – including to industries that do not come anywhere near our fuel and carbon efficiency record – a tremendous amount of free allowances, apparently to cushion the economic blow and to pay for modernizing their equipment and facilities to reduce emissions. In effect, the bill would require our industry – which, as detailed above, has made tremendous strides in reducing its GHG profile – to subsidize future efforts of other industries that have done comparatively little to reduce their GHG profiles. The inequity and public policy flaws in this approach are readily apparent.
Moreover, as an industry covered indirectly upstream, aviation would not have access to the offsets, credit for early action or banking options offered in the bill that are further intended to provide flexibility and mitigate cost impacts to certain of the covered sectors. Again, aviation – a sector that has a remarkable fuel efficiency record and already is fully incentivized by existing fuel costs to conserve fuel and reduce emissions to the fullest extent – inequitably would be subject to the full brunt of the bill’s cost effects without any cost mitigation options.
Nor does the bill take into account that a certain portion of emissions attributed to aviation are out of the airlines’ control, caused by delays in our outdated air traffic control (ATC) system. Indeed, studies show that the proposed redesign of the ATC system through the Next Generation Air Transportation System (NextGen) project could eliminate 10-15 percent of the system-caused delays, resulting in commensurate fuel burn and emissions savings. ATA is supporting this modernization initiative, which is bound up in the FAA Reauthorization process that appears to be stalled in Congress, through our “Smart Skies” program.6 As Congress is a key player in ensuring the future of our ATC system, we continue to urge Congress to act. In any event, any climate change legislation purporting to cover aviation should not attribute the emissions due to the outdated system to the airlines.
Another concern is how the bill proposes to handle funds from the auctioning of emissions permits. While the bill proposes to rechannel funds from such auctioning into certain technology research and development (R&D) programs, there is no proposed rechanneling of funds into aviation R&D or into alterative jet fuel research. As we have noted in other contexts, congressional funding to NASA and FAA for aeronautics R&D – specifically including for environmental projects – has been cut significantly (by about 50 percent) in the past 8-10 years, compromising the public-private partnership for exploring and bringing to market products with significantly improved environmental performance.7 Though the government should reinstate funding for aeronautics R&D without regard to the specific climate change legislation in any event,8 such funding could be supplemented with funds rechanneled from any auctioning.
In addition to our aviation-specific concerns regarding the bill, we also have concerns about the volatility in energy costs that analysts predict will result from the bill, the potential for a patchwork quilt of confusing and potentially conflicting climate change economic regulation as between the federal and state governments in light of the bill’s provision asserting that states may, in addition, have their own requirements, among others. Further, the extremely broad discretion and authority provided to subsequent Administrators of the Environmental Protection Agency for several decades makes it difficult to understand the impacts the bill will have on our industry. We urge you to take these considerations into account. Moreover, given the far-ranging ramifications of S. 2191, we urge the Senate to undertake the analysis necessary to fully understand the effects of the proposal and to take the time needed for deliberate and transparent review. Frankly, the less than two-week rush through subcommittee and the current rush through committee do not appear to amount to deliberative review.
Thank you for your consideration of our views.
Sincerely,