For those of you unfamiliar with the cap-and-trade system called the European Union Emissions Trading System (EU-ETS), you may need to read this – it could come into play in a major way this year.

The EU-ETS Backstory

European nations have long wanted the United Nations (UN) to establish global standards governing carbon emissions for all industry. But time and again, a consensus on what those standards should look like and how they should be instituted has proven elusive. The EU decided to take matters into their own hands – at least in regards to meeting carbon emission reduction targets for Europe.

The EU instituted EU-ETS in 2012. It basically levels fees on businesses for carbon (CO2) emissions for all its member states, and it applies to all industry, including aviation. EU-ETS established a cap-and-trade approach to the buying and selling or auctioning of carbon credits, which in turn funded further research and development. Heavy, heavy protests from non-European airlines – namely those from the U.S., China and India arose, citing the scheme would ignite trade wars and negatively impact national sovereignty.
Based on these protestations and an overriding desire for a comprehensive global approach to reducing carbon emissions, the EU decided in 2013 to delay the implementation for aircraft operating to and from destinations outside of the EU until 2017. The EU-ETS rules would still apply, however, to flights operating within the European economic area.

This compromise, authored by the European Commission and endorsed by the European Parliament, is called “Stop-the-Clock.” It was considered a reprieve that would allow the UN’s International Civil Aviation Organization (ICAO) enough time to develop a global agreement on market-based measures (MBMs). The provision would be extended by one year and re-extended only if significant progress was made toward establishing meaningful MBMs.

Some European airlines were furious with the provision, however, and threatened legal action on the grounds that it discriminated against intra-EU carriers that were participating in EU-ETS. They felt it placed unfair financial burdens on them and hampered them in planning for and attaining operational stability – not to mention the various legal uncertainties involved.

The State of Current Affairs

On February 8, 2016, the ICAO codified global CO2 emissions standards for the aviation industry. During its annual meeting, ICAO’s Committee on Aviation Environmental Protection (CAEP), made up of 170 international member experts, recommended measures for environmental improvements that would begin taking effect in 2020.

The plan consists of three main components:
1. Develop a CO2 efficiency standard for new aircraft
2. Develop guidance documents on operational measures
3. Develop and test alternative sustainable drop-in fuels from non-fossil sources

The new emissions standards would not only apply to new aircraft types equipped with the latest technological advancements, but it would apply to new aircraft deliveries of current, in-production types starting in 2023. Additionally, the committee recommended a 2028 cut-off date for the production of aircraft types that do not comply fully with the new standards.

A small side note: In June 2015, the U.S. Environmental Protection Agency (EPA) also began formulating national CO2 emissions regulations, but little is known about what those will entail. This move by the EPA came about in part from the failed efforts of the legislative branch to pass into law a cap-and-trade system, similar to EU-ETS in 2009. Though the House of Representatives passed the American Clean Energy and Security Act (also known as the Waxman-Markey Bill), the Senate never brought it to the floor for discussion.

The new CAEP standards are especially rigorous for larger aircraft types, 60 tons or greater, whose operations account for more than 90 percent of international aviation emissions. Keep in mind: Worldwide aviation emissions account for roughly 2 percent of total emissions, but that amount is predicted to increase significantly by 2030 due to projected increases in passenger air travel. That said, the standards developed in February 2016 cover all aircraft of all sizes involved in international aviation.

Since the February meeting, there hasn’t been much published on behalf of CAEP, the European Commission, or the European Parliament on this matter. The Stop-the-Clock provision of EU-ETS is due to expire by the end of this year. Yet it remains unclear what further actions and implementation processes will take effect for the newly defined CAEP measures. If the clock runs out on Stop the Clock before the new CAEP standards are formalized, the global aviation community may find itself right back where it was in 2013 when the furor erupted over EU-ETS.

Meanwhile, the National Business Aviation Association (NBAA) is standing strong in its opposition to EU-ETS’s CO2 emission standards for civil aviation. They also provided input for ICAO’s Committee after its February 2016 recommendations came out. NBAA is optimistic that the CAEP-recommended measures would empower civil aviation (including business aviation) to reduce global emissions through performance improvements while sustaining economic growth. Ultimately, the Washington, DC-based organization seeks to promote business aviation while actively advocating for ways to minimize its impact on the environment – both in regards to emissions, effects on the ozone, etc. and with aircraft noise.

For more updates throughout the year on what will happen next with EU-ETS, visit UAS Blog and NBAA’s website.