The U.S. Transportation Department is considering a “range of options” to respond to the European Union’s emissions trading scheme (ETS), according to the testimony of a high-level agency official before the House aviation subcommittee.

“In January next year, U.S. aircraft operators will begin to incur liability for greenhouse gas emissions under the EU-ETS,” said Susan Kurland, DOT assistant secretary for aviation and international affairs. “We strongly object, on both legal and policy grounds, to the proposed unilateral imposition of ETS on foreign operators.”

Krishna Urs, deputy assistant secretary for transportation affairs at the U.S. Department of State, told the subcommittee that he met with EU officials in Oslo in June and delivered the Obama Administration’s formal objections to the EU’s unilateral inclusion of U.S. airlines in ETS. With him in Norway were representatives from the FAA, DOT, the U.S. Environmental Protection Agency, the U.S. Department of Commerce, the U.S. aviation industry and U.S. environmental organizations.

In July, a bipartisan group of House Transportation Committee leaders filed legislation to ban U.S. air carriers from participating in the EU-ETS. The bill, the “European Union Emissions Trading Scheme Prohibition Act of 2011,” directs the Secretary of Transportation to prohibit U.S. aircraft operators from participating in the EU’s ETS. It also instructs U.S. officials to negotiate or take any action necessary to ensure U.S. operators are not penalized by any unilaterally imposed EU-ETS.

Rep. John Mica (R-Fla.), chairman of the full House Transportation Committee, said he plans to take the bill (H.R. 2594) to the House floor for a vote as soon as possible. He characterized EU-ETS as “an arbitrary fee, or scheme.”

Challenges to ETS

Kurland testified that inclusion of foreign operators in the EU-ETS is inconsistent with international aviation law and practice. “As a legal matter, we consider the EU-ETS directive to be inconsistent with both the Chicago Convention and the U.S.-EU Air Transport Agreement,” she said, but she declined to disclose what options the Transportation Department is considering.

Urs said the State Department also is “considering options that are available to us.” He said response to EU-ETS is “overwhelmingly negative” and added “a number of countries share our position.”

Meanwhile, U.S. airlines have challenged EU-ETS before the European Court of Justice as a violation of international law. Kurland told lawmakers that the DOT believes the EU has no transparent methodology or standards for its application of a provision that allows carriers from countries undertaking “equivalent measures” for reducing emissions to be exempted from the EU-ETS. And contrary to EU assertions, she said, work by the International Civil Aviation Organization has recognized a range of approaches for reducing greenhouse gas emissions and has not endorsed any one measure exclusively.

Further, Kurland claimed that any money U.S. airlines pay to European treasuries is money that is not available to invest in new aircraft and equipage required under the NextGen plan, which is designed to reduce emissions. Moreover, despite public statements pledging ETS revenues as a source of climate-mitigation funding, the EU-ETS imposes no requirement that revenues generated from the auction of ETS allowances be used to address climate change. She said the DOT is not aware of any commitments by any EU member state to earmark ETS revenue for climate change mitigation purposes.

“Finally, the EU-ETS does not preclude EU member states from levying additional emissions-related charges or taxes, or maintaining existing levies,” Kurland told the panel. “There are already countries, such as Austria, Germany and the UK, that have done so.” She added that a U.S. air carrier could pay multiple times for the same ton of CO2 emissions.

According to Kurland, European Commission representatives insisted at the Oslo meetings that the ETS directive will not be amended or delayed, and the only way for U.S. carriers to be even partially exempted would be for the U.S. to demonstrate equivalent measures. “The ambiguous responses of the EU to U.S. questions about potential discrimination and criteria for equivalence in possible EU exemptions for third countries only heightened our concerns,” she added.

As currently constructed, ETS would tax a flight from San Francisco to London across the entire U.S. and across the Atlantic Ocean. Capt. Lee Moak, president of the Air Line Pilots Association International, predicted that ETS will cause flight patterns to change, with new stopovers and the eventual growth of hub airports, particularly in such places as the Middle East.