Jetrader - November/December 2013 - 16

An Uncertain Future Remains for

Aircraft Emissions Regulation
EU responds to ICAO's resolution to postpone creation of a global emissions scheme
By Kristen Chmielewski, attorney, Global Transportation Finance team at Vedder Price P.C.


Initial reaction by the European Commission
to the recently concluded triennial General
Assembly of the International Civil Aviation
Authority (ICAO) has created additional
uncertainty for aircraft operators based
outside the European Union (EU) as to
whether (and when) they will be subject
to a unilaterally imposed market-based
measure (MBM)1 for regulating aircraft
carbon emissions. On 4 October 2013, the
191 states comprising ICAO agreed upon
a resolution delaying global implementation of MBMs regulating carbon emissions
such as the EU's Emissions Trading Scheme
(EU ETS) while ICAO member states
work on the design, scope, application
and administration of a global scheme.
Despite hope that the framework for such
a global scheme might be determined by
the end of the 2013 ICAO meetings, such
a framework will not be introduced until
ICAO's next General Assembly in 2016,
at the earliest, for implementation commencing in 2020. However, despite the
overwhelming 97-39 consensus to delay
implementation of a global MBM, the EU
Commission announced on 16 October 2013
draft amendments to EU ETS that would,
effective early 2014, regulate emissions
on any international flight into or out of
any EU member state (as well as Iceland,
Norway and Liechtenstein) (collectively,
the "EU ETS Territory")2 to the extent of
such flight's path within the airspace of
the EU ETS Territory, unless the operator
or the flight is otherwise exempt from EU
ETS requirements. Under the proposals,
flights to and from low and lower-middle
income countries, as defined by the World
Bank, with a share of less than 1 percent
of international aviation revenue ton
kilometers (RTKs) would be exempted,
and new exemption levels have been set
for business jet operators3. This article
will outline the steps the global aviation
community has taken toward developing
a global emissions regulation scheme and
discuss the continued uncertainty facing

the world's aircraft operators, owners and
financiers on this issue.
Industry representatives and government officials from ICAO member states
have worked since last November to develop
the framework for a global MBM for presentation to the ICAO General Assembly
that just concluded. A special meeting of
the ICAO Council on 4 September 2013
resulted in a draft climate change resolution establishing a global carbon emissions
standard for aircraft, sustainable alternative
fuels, state action plans and regional or
national MBMs (until the global system
is established)4. However, not all parties
were satisfied with the draft resolution,
necessitating extensive further debate
and amendment to reach the resolution
ultimately passed on final 4 October 2013.
On the one hand, the United States, China,
India, Brazil and Russia loudly oppose the
application of EU ETS to their air carriers. On the other hand, the International
Aviation Industry Association (IATA) and
other organizations strongly support an
ICAO-sanctioned MBM program. Even within
the EU ETS Territory there is no clear
consensus. The European Low Fares Airline
Association (ELFAA), whose members
include Ryanair and easyJet and account
for more than 43 percent of intra-EU traffic,
started legal proceedings (which have been
stayed pending the upcoming deliberations
by the EU Parliament) arguing that the EU
should honor its commitment to "restore
the environmental effectiveness of the EU
ETS, and EU credibility, by reverting to the
legal 'all flights' scope," of EU ETS, which
would encompass non-EU operators flying
into, out of or over EU ETS Territory.5 By
contrast, the European Regions Airline
Association (ERA), whose members include
50 intra-EU regional airlines, supports
ICAO's commitment to a global scheme,
noting that "there is now no place for
regional schemes... It makes no sense in
having a scheme that applies to intra-EU
flights, which will only capture a very small

16 The official publication of the International Society of Transport Aircraft Trading

amount of CO2 emissions."6 Contrary to the
hopes of those who thought the aviation
carbon emissions debate would be resolved
by the conclusion of the most recent ICAO
General Assembly, it appears that ICAO is
effectively "kicking the can down the road"
for another three years prompting, the
Commission's actions on 16 October 2013.
ICAO's leadership lauds the most recent
General Assembly resolution as a "historic
milestone for air transport and for the
role of multilateralism in addressing global
climate challenges."7 However, the reality is that the General Assembly merely
determined that a global MBM could be
devised, but only after further research is
conducted and more efficient technologies
and procedures are developed. The General
Assembly failed to produce agreement on
any details of how a global program would
ultimately work. The goal is now to finalize
a global MBM scheme at the 2016 ICAO
General Assembly for implementation by
2020. As drafted, the resolution permits
countries or regional blocs to develop
their own MBMs in the interim, (such as
those from the U.S., China, India and
other countries presently opposed to EU
ETS being applied to their operators) but
effectively prevents the EU from meaningfully expanding EU ETS to include foreign
carriers by requiring the consent of any
government outside the EU ETS Territory
prior to the inclusion of its operators
under the scheme, until a global program
is established. The resolution invites States
to submit their voluntary action plans by
the end of June 2015, and encourages those
States that already submitted their action
plans to share information with the public
and build partnerships with other member
States in order to support those States
that have not prepared their action plans.8
Further, any national or regional MBMs will
exempt flights to and from nations whose
flag carriers hold less than 1 percent share
of the global market (measured in RTKs)9.
Although the ICAO General Assembly did


Jetrader - November/December 2013

Table of Contents for the Digital Edition of Jetrader - November/December 2013

A Message from the President
ISTAT Europe 2013
An Uncertain Future Remains for Aircraft Emissions Regulation
A High-Flying Birthday Celebration
Financiers and the Digital Airplane
Advances in Engine Architecture
Aviation History
Aircraft Appraisals
ISTAT Foundation
ISTAT Members on the Move
New and Returning Members Index
Jetrader - November/December 2013 - cover1
Jetrader - November/December 2013 - cover2
Jetrader - November/December 2013 - 3
Jetrader - November/December 2013 - A Message from the President
Jetrader - November/December 2013 - 5
Jetrader - November/December 2013 - 6
Jetrader - November/December 2013 - 7
Jetrader - November/December 2013 - 8
Jetrader - November/December 2013 - Calendar/News
Jetrader - November/December 2013 - ISTAT Europe 2013
Jetrader - November/December 2013 - 11
Jetrader - November/December 2013 - 12
Jetrader - November/December 2013 - 13
Jetrader - November/December 2013 - 14
Jetrader - November/December 2013 - 15
Jetrader - November/December 2013 - An Uncertain Future Remains for Aircraft Emissions Regulation
Jetrader - November/December 2013 - 17
Jetrader - November/December 2013 - A High-Flying Birthday Celebration
Jetrader - November/December 2013 - 19
Jetrader - November/December 2013 - Financiers and the Digital Airplane
Jetrader - November/December 2013 - 21
Jetrader - November/December 2013 - 22
Jetrader - November/December 2013 - Advances in Engine Architecture
Jetrader - November/December 2013 - 24
Jetrader - November/December 2013 - Aviation History
Jetrader - November/December 2013 - 26
Jetrader - November/December 2013 - 27
Jetrader - November/December 2013 - 28
Jetrader - November/December 2013 - Aircraft Appraisals
Jetrader - November/December 2013 - 30
Jetrader - November/December 2013 - 31
Jetrader - November/December 2013 - ISTAT Members on the Move
Jetrader - November/December 2013 - New and Returning Members
Jetrader - November/December 2013 - Index
Jetrader - November/December 2013 - cover3
Jetrader - November/December 2013 - cover4