Domestic Action on Aviation Carbon

7/31/2019 Domestic Action on Aviation Carbon

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blue skies proj

K PHOTO

Domestic Actionon Aviation CarbonUsing the Clean Air Act to Cut Aviation Emissions

and Create an Alternative to the European Union

Emissions Trading System

Nathan Richardson and Samuel Grausz July 2012


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ii Blue Skies Project | Domestic Action on Aviation Carbon

About the Blue Skies project

Te Blue Skies projec is a collaboraive research iniiaive ha works o help make

aviaion sae, aordable, secure, and clean. Te projec provides in deph legal,

poliical, and economic research on issues ha vially aec he aviaion secor.

Trough his research and oureach o key sakeholders, he projec seeks o buildconsensus and posiive collaboraion.

Our rs repor, Is he Sky Falling or Airline pros in he European Union?,

seeks o creae common undersanding o he economic consequences o one o

he mos conroversial aviaion emissions policies currenly under consideraion,

he inclusion o aviaion in he European Union Emissions rading Sysem. Tis

repor, our second and also a collaboraion beween Climae Advisers and he

Cener or American Progress, explores he possibiliies o using he Clean Air

Ac o prepare or an inernaional policy in ICAO or craing a domesic alerna-

ive policy or he Unied Saes. Boh o hese repors are analyical and do noatemp o advocae or a specic policy or se o policies.

Tis paper is based o a more deailed analysis o he same issue by Nahan

Richardson, Aviaion, Carbon, and he EPA, published by Resources or he Fuure.

For more inormaion on he Blue Skies projec or his repor, please conac Samuel

Grausz o Climae Advisers by phone a (206-851-6156) or by email a grausz@

climaeadvisers.com, and Rebecca Leon o he Cener or American Progress by

phone a (202-478-5323) or by email a [email protected].


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iii Blue Skies Project | Report Title

Domestic Action

on Aviation CarbonUsing the Clean Air Act to Cut Aviation

Emissions and Create an Alternative to the

European Union Emissions Trading System

Nathan Richardson and Samuel Grausz July 2012


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Contents 1 Introduction and summary

4 Regulatory history

4 The Clean Air Act and aviation

5 The Clean Air Act and carbon

6 Domestic developments to date

7 What and how can the EPA regulate?

8 Scope

11 Regulatory tools

12 Stringency

12 Revenues

14 Conclusion

16 About the authors and acknowledgements

17 Endnotes


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1 Blue Skies Project | Report Title

Introductionand summary

International aviation generates more than 3 percent o totalglobal greenhouse gas emissions per year. This amount isrelatively small but growing quickly, with worldwide aviation

emissions projected to increase 300 percent to 700 percent

by 2050. Until recently the sector aced no limits on these

emissions. But starting this year, 2012, the European Union

began regulating emissions rom all ights to and rom EU

airports. Crucially, the European Union law covers both oreign

and EU airlines and their emissions produced over their entire

ight path, not just over EU airspace.


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2 Blue Skies Project | Domestic Action on Aviation Carbon

Te new law, which is opposed by much o he aviaion indusry, has led o an

ongoing legal and diplomaic conic wih he Unied Saes and oher counries

and hreaens o rigger a rade war. Opponens conend ha he law violaes

Europes inernaional obligaions and will subsanially increase aviaion coss.

Supporers argue ha he law is legal and will do litle o harm airlines and could

even bene hem in he shor run. (We discuss he economic impacs in greaerdeail in our rs Blue Skies Projec repor, Is he Sky Falling or Airline Projecs

in he European Union?1)

Many U.S. airlines and he U.S. governmen have been leading opponens o he EU

law. Tree U.S. airlines and heir rade associaion pursued legal claims agains he EU

ha he European Cour o Jusice ulimaely rejeced in lae 2011.2 Te U.S. aviaion

indusry is also calling on he ederal governmen o challenge he EU law in inerna-

ional cour.3 Te U.S. governmen helped o convene wo meeings (in Delhi, India

and in Moscow) o opponens o he EU law and spearheaded a resoluion in he

Inernaional Civil Aviaion Organizaion, or ICAO, declaring he EU law illegal.4

Despie his opposiion, he U.S. airlines and governmen have so ar complied

wih he EU law, unlike China and India, who reuse o allow heir airlines o

comply. In realiaion, China also recenly cancelled an order o airplanes rom

European plane manuacurer Airbus.5 Te U.S. sance could soon change: In

Ocober 2011 he U.S. House o Represenaives passed a measure ha would

preven U.S. airlines rom complying wih he EU law. Te U.S. Senae held hear-

ings on he measure in June. Te conic wih he EU could quickly escalae ino a

rade war and do signican harm o he weak U.S. and European economies.

Counries on boh sides o he dispue suppor replacing he EU law wih an

inernaional policy under he direcion o ICAO. ICAO is currenly consider-

ing possible marke-based measures o reduce greenhouse gas emissions rom

aviaion. I has debaed such a policy or 15 years, hough i has recenly accel-

eraed he process and a dra proposal is expeced in March 2013. Pas ailures,

however, and he inheren difculies o global climae negoiaions make i

unclear wheher ICAO will succeed.

Te U.S. Clean Air Ac6

will play a vial role in uure policy discussions wheherhe ICAO process succeeds or ails. I ICAO succeeds, hen he Unied Saes will

likely use he Clean Air Ac o implemen he ICAO policy much as i has done

or pas aviaion policies. I ICAO ails, hen he Unied Saes could develop is


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own aviaion emissions policy under he Clean Air Ac and hereby escape he

EU program. A U.S. measure o limi greenhouse gas emissions ha is deemed

equivalen o he EU program would exemp ighs o and rom he Unied Saes

under he EU law.7 Any oher policy hrough new legislaion under eiher o hese

scenarios is unlikely due o he curren poliical climae in Washingon. Tus, o

inorm eiher o hese scenarios, his paper explores opporuniies or regulainggreenhouse gases rom aviaion under he Clean Air Ac, ocusing on opporuni-

ies or exible, cos-eecive regulaion.

We conend ha he EPA could cra aviaion emissions regulaions under he

Clean Air Ac ha could achieve boh environmenal and indusry goals while

implemening he ICAO policy or saisying he EU equivalency requiremen.

Tese regulaions could be boh broad and exible, covering exising and new air-

cra engines and allowing compliance hrough airrame and operaional changes.

Te EPA migh also be able o use marke-based regulaory ools, urher increas-

ing exibiliy and likely cos-eeciveness.

We recognize, however, ha here are imporan limiaions as well as challenges.

Clean Air Ac regulaion could no generae revenue o und inernaional climae

nance or oher prioriies. Furher, he regulaion would likely no cover emissions

ouside o U.S. airspace, hough i would indirecly reduce hem. Also, inernaional

law may complicae regulaion o oreign-ag airlines. And as wih any conenious reg-

ulaion under he Clean Air Ac, poliical, adminisraive, and legal challenges are likely.

Tese and oher ndings are summarized in Figure 1.

Figure 1

Summary of findings

Issue Finding

Could EPA regulate greenhouse gases rom aviation? Yes

Could EPA regulate air rames and operations in addition to engines? Yes

Could EPA regulate existing engines in addition to new engines? Yes

Could EPA regulate oreign air carriers? Maybe

Could EPA regulate emissions outside U.S. airspace? No, but indirect reductions occur

Could EPA employ exibility mechanisms like trading, banking, and borrowing? Probably

Does EPA have discretion over stringency? Yes

Could EPA use the regulation to raise revenue? No


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Regulatoryhistory

The Clean Air Act and aviation

The Clean Air Act grants the EPA authority to regulate aviation

emissions under Title II, Part B (Sections 231-234). These

provisions, part o the 1970 Clean Air Act, are only about a page

in length and their substantive provisions are even shorter. The

core provision, Section 231(a)(2)(A), is only a single paragraph:

The Administrator shall, rom time to time, issue proposed

emissions standards applicable to the emission o any air

pollutant rom any class or classes o aircrat engines which in

his judgment causes, or contributes to, air pollution which may

reasonably be anticipated to endanger public health or welare.8


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Te remainder o Par B deals mosly wih procedural requiremens. In develop-

ing he sandards, or example, he EPA mus consul wih he Federal Aviaion

Adminisraion, or FAA, which has he power and he responsibiliy o enorce he

sandards developed by he EPA.9 Te EPA would probably consul wih he FAA

regardless o his requiremen, as he FAA has he sole auhoriy o regulae avia-

ion uels, which could have a signican impac on he sringency, eeciveness,and he cos o air emissions regulaions.10 Furher, Secion 231 o he Clean Air

Ac requires he EPA o consider he adverse impacs o he sandards on saey

and noise11 and requires consideraion o he coss and he pace o echnological

developmen in seting compliance imelines.12

Te EPA rs issued aviaion emissions sandards under ile II Par B in 1973,

imposing limis on smoke, uel vening, and specied polluans, specically, hydro-

carbons, carbon monoxide, and nirogen oxides.13 Te sandards applied o boh

new and exising engines, hough sringency diered beween he ypes o pollu-

ans. Te EPA, however, never updaed he exising engine sandards and relaxednew engine sandards over he nex decade, bringing he sandards ino line wih

hose issued by he Inernaional Civil Aviaion Organizaion. 14 Since hen he EPA

has generally se sandards ha closely ollow hose issued by he ICAO.15 As he

ICAO sandards only apply o new engines and have no been paricularly aggres-

sive, and since U.S. manuacurers mus comply wih hem as a condiion o selling

aircra engines on he inernaional marke, he EPAs sandards have likely no

independenly led o signican changes o engine or aircra design.

The Clean Air Act and carbon

Te U.S. Supreme Cours 2007 decision inMassachusets v. EPA opened he way for

regulaion of greenhouse gases under he Clean Air Ac.16 Te EPA under he George W.

Bush adminisraion did no issue an endangermen nding or greenhouse gases

he prerequisie or regulaionhough i did issue an Advance Noice o Proposed

Rulemaking discussing possible regulaory acions and requesing commen.17

Te EPA under he Obama adminisraion, however, has moved orward wih

greenhouse gas regulaions under he Clean Air Ac. Te agency made a ormalendangermen nding or greenhouse gases rom ligh-duy vehicles and issued

expansive regulaions or ligh-duy and heavy-duy vehicles. Te EPA has also

The EPA frst

issued aviation

emissions

standards unde

Title II Part B in

1973, imposinglimits on smoke

uel venting,

and specifed

pollutants,

specifcally,

hydrocarbons,carbon monoxi

and nitrogen

oxides.


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moved o regulae greenhouse gas emissions rom cerain large new and modied

saionary sources hrough permiting and perormance sandards,18 and will likely

regulae exising sources in he near uure.

Domestic developments to date

Te EPA under he Obama adminisraion has no, however, moved o regulae

greenhouse gas emissions rom aviaion under he Clean Air Ac. Tis is no

paricularly surprising. While U.S. greenhouse gas emissions rom aviaion are no

rivial and are expeced o grow dramaically in coming decades, hey are dwared

by emissions rom he secors argeed by he EPA o daeroad ransporaion

and elecric power generaion.19

Despie his, some have sough o push he agency o regulae aviaion greenhouse

gas emissions. Shorly aer he Supreme Cours Massachusets decision in 2007,several sae governmens and environmenal groups separaely peiioned he EPA

o regulae aviaion emissions.20 When he agency did no ormally respond o hese

peiions, he environmenal groups sued, claiming ha he Clean Air Ac, in ligh o

he agencys decision o regulae road-vehicle greenhouse gas emissions, requires i

o pursue aviaion greenhouse gas regulaion.21 In July 2011 he D.C. Circui Cour

o Appeals denied a preliminary moion by he EPA o dismiss he case, nding

ha he agency has a duy o underake an endangermen deerminaion or aircra

engines. In March 2012 he Cour held ha o dae, EPAs delay in iniiaing he

regulaory process has no been unreasonable, bu ha he agency mus provide a

ormal response o he environmenal groups peiion wihin 90 days.22 EPA subse-

quenly responded ha i would delay aking acion unil i resolved legal dispues

surrounding is regulaions o GHGs rom saionary sources.23

Bu his liigaion addresses only wheher he EPAmusregulae now, no how

i could do so. A new look a he relevan saue, inormed by boh pas use and

more recen regulaory acion or greenhouse gases under oher pars o he Clean

Air Ac, is hereore needed.


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What and howcan the EPAregulate?

I and when the EPA does regulate aviation greenhouse gasemissions, the agency will have to make three choices: Scope o the regulation

Regulatory tools available

Regulation stringency


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Te scope o he regulaion and he regulaory ools available o he EPA are legal

quesions, bu he sringency o he regulaion is predominaely a policy ques-

ion, albei wih some legal consrains. Our legal analysis indicaes ha he EPA

has broad auhoriy o deermine he scope, regulaory ools, and sringency o is

regulaions in his area. We conclude, however, ha he agency probably canno

generae revenues or inernaional climae nance hrough he regulaionanimporan limiaion o a Clean Air Ac approach.

Scope

While in he pas he EPA has generally ollowed he Inernaional Civil Aviaion

Organizaion in regulaing only new aircra engines o air carriers ying ino and

ou o he Unied Saes, he relevan secions o he Clean Air Ac give he EPA

much broader powers.

Specically, we nd ha he saue provides he agency wih auhoriy o regulae

emissions rom new and exising engines operaed by boh oreign and domesic

air carriers, and o do so wih perormance sandards ha allow hose carriers o

use airrame improvemens and operaional changes (as well as engine upgrades)

o mee emissions reducion requiremens. Te EPA does no likely have he

auhoriy o regulae emissions ouside U.S. airspace, bu regulaions would likely

indirecly reduce hese emissions.

Beyond new engines

radiionally, EPA aviaion sandards have only applied o new engines, imposing

a lab-measured maximum emissions rae or each engine class. Te EPA could eas-

ily impose similar sandards or greenhouse gas emissions, bu he saue allows

much broader regulaion.

Firs, he Clean Air Ac does no limi EPA auhoriy o new enginessandards

may apply o any class or classes o aircra engines. 24 Te absence o a limiaion

o new engines (and he exisence o such a limiaion elsewhere in he Clean AirAc or oher sources) indicaes ha Congress did no inend o resric he regula-

ions o new engines.25 Moreover, he EPA regulaed exising aircra engines as

par o is rs se o emissions sandards in 1973.


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Secondly, engine improvemens need no be he only mehod o complying wih

emissions rules. A narrow reading o he saue would resric he EPA o is

radiional approachdirec regulaion o engines alone. Bu engine emissions

raes depend largely on airrame design and operaional acors and radiional

engine-only sandards would no allow operaors o ake advanage o emissions-

reducion opporuniies rom hese nonengine characerisics.

A broader, and we believe, superior reading o Secion 231 would no limi he EPA

o engine-only regulaion. Te sandards prescribed by he saue do no arge

engines hemselves bu insead he emissions rom engines. Specically, he saue

auhorizes sandards applicable o he emissiono any air polluan rom . . . aircra

engines.26 Te EPA could hereore creae perormance sandards based on real-

world engine emissions, no one-ime lab-measured emissions raes or each engine

model. Such perormance sandards could be se a benchmark raes o greenhouse

gas emissions per on/kilomeer raveled or dieren classes o aircra.

An air carrier covered by such a perormance sandard could comply by upgrading

or reroting engines o improve uel economy, bu also by upgrading or reroting

is airrames or changing is operaional pracices. Carriers could reduce heir emis-

sions and comply wih a perormance sandard by cuting aircra weigh, adding

wingip devices, or changing cruise speed or axi paterns, o give only a ew exam-

ples. Choices over how o comply would remain wih he air carriers, which likely

have he bes inormaion abou which compliance sraegies are mos cos eecive.

Perormance sandards are a well-undersood regulaory ool used under he Clean

Air Ac and oher environmenal saues. While Secion 231 does no explicily

menion perormance sandards, hey seem well wihin is auhorizaion o impose

emission sandards.27 Te EPA signaled ha i would consider a perormance

sandards-like approach in he 2008 Advance Noice o Proposed Rulemaking.28

By raming is regulaion as a se o perormance sandards or he emissions o air

polluans across he range o acual operaional conexs, he EPA can give com-

plying airlines reedom o selec among a broad se o compliance sraegies. Tis

approach would reduce coss and oser innovaion no only in engine design, bu

also more broadly in airrame design; on-board avionics; landing, akeo, climb,and cruise pracices; air-rafc managemen echnologies; and oher areas.

The EPA

could create

perormance

standards base

on real-world

engine emissio

not one-time

lab-measured

emissions rate

or each engin

model.


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Foreign carr iers operating in the United States

Te Clean Air Ac does no limi EPA auhoriy o U.S. carriersas previously

noed, sandards may apply o any class or classes o aircra engines ha cause

or conribue o air polluion.29 In ac, he agency would have litle or no basis

under he Clean Air Ac on which o disinguish oreign carriers emissions in heUnied Saes. Foreign carriers already mus comply wih oher exising Federal

Aviaion Adminisraion and EPA regulaions, including EPA emissions sandards

or nirogen oxides and oher polluans.

Inernaional law, however, migh consrain regulaions on oreign carriers.

Specically, he 1947 Chicago Convenion on Inernaional Civil Aviaion (he

Chicago Convenion)30 may limi sae paries auhoriy o impose regulaions

on oreign air carriers ha are more sringen han inernaional sandards adoped

by he Inernaional Civil Aviaion Organizaion. Te U.S. airline indusry made

his argumen in is lawsui agains he European Union31 and he EPA isel hasaken a similar posiion.32 Te European Union and ohers have argued, however,

ha he Chicago Convenion imposes no such resricion.33

Poliically, regulaing oreign air carriers migh expose he Unied Saes o claims

o hypocrisy i he Unied Saes coninues o oppose he European Unions

decision o do he same hing. From an economic and environmenal perspec-

ive, however, regulaion ha applies equally o oreign and domesic air carri-

ers is superior o domesic-only sandards as he later would avor oreign over

domesic air carriers while allowing greaer emissions and environmenal harm.

Domesic-only sandards would also likely necessiae policies o proec U.S. car-

riers rom compeiion wih unregulaed oreign carriers.

Aviation emissions outside the United States

Te EPA almos cerainly canno regulae aviaion emissions ouside he Unied

Saes under he Clean Air Ac. Cours generally inerpre saues no o gran

exraerriorial auhoriy unless he saue explicily grans i, and no exraerrio-

rial auhoriy is in his aricle o he Clean Air Ac.34

Pracically, however, regulaion would likely resul in emissions reducions ouside

o U.S. airspace. Any engine or airrame upgrades in response o regulaion would


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cause emissions o be reduced wherever hose airplanes y. Airplane and engine

manuacurers migh also respond o emissions regulaions in major markes like

he European Union and he Unied Saes by improving he uel efciency o all

heir producsas hey are already doing in response o marke orces.

Regulatory tools

Perormance sandards, as described above, would give carriers a wide variey

o compliance opions. In heir basic orm, however, perormance sandards sill

require each engine operaed by each air carrier o mee he sandard each year.

Bu he EPA may be able o gran broader exibiliy o airlines, including he abil-

iy o average emissions perormance across heir ees, bank improvemens in

emissions perormance or he uure, and rade improvemens in emissions per-

ormance among airlines. Using hese ypes o exibiliy ools could allow airlines

o achieve he same emissions reducions a a lower cos.

Does he Clean Air Ac allow he EPA o oer his exibiliy o airlines? Te

agency argued ha i does in is 2008 Advanced Noice o Proposed Rulemaking35

and nohing in he sparse language o he saue conradics his view. Te saue

only requires use o emissions sandards wihou discussing exibiliy. Te EPA

and legal scholars have broadly inerpreed similar language elsewhere in he

Clean Air Ac o allow a leas some orms o exibiliy. Secion 111 o he ac,

or example, direcs he agency o cra perormance sandardspresumably a

subype o emissions sandardsand he EPA36 and legal scholars37 have aken

he posiion ha his secion allows he ypes o exibiliy mechanisms described

above.38 Te agency has also allowed similar exibiliy in oher regulaions such as

inersae rading programs or nirogen oxides emissions,39 auo ee uel econ-

omy sandards,40 and oher Clean Air Ac programs.41

None o hese policies oer an exac parallel and no cour has addressed he permis-

sibiliy o hese exibiliy measures under Secion 231. Te cours have ruled, how-

ever, ha he EPAs inerpreaion o Secion 231 deserves subsanial deerence due

o he breadh o is gran o auhoriy,42 and on balance he evidence in avor o he

EPA having he auhoriy o allow his ype o exibiliy appears srong. I he EPAcan employ averaging, banking, and rading under he Clean Air Ac, i migh be

able o cra more creaive, exible, and likely more cos-eecive aviaion emissions

regulaions such as radable perormance sandards or even a cap-and-rade sysem.


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Stringency

Te Clean Air Ac places ew resricions on he level o sringencyhe degree o

emissions reducions requiredha he EPA can se on aviaion regulaions. As

described earlier, he saue only requires ha he EPA consul wih he Federal

Aviaion Adminisraion, ha he sandards no signicanly increase noise oradversely aec saey, and ha he EPA consider he echnological concerns and

coss in seting he ime allowed or emiters o comply.43 Tis is unlike oher sec-

ions o he Clean Air Ac, which require regulaions o mee specied sringency

arges such as proecion o public healh and/or welare,44 or o be based on

specied echnology levels such as he bes sysem o emission reducion.45

Wihou such explici limiaions or sandards, cours have generally held ha

he EPA has broad discreion over sringency. Te EPA hereore has discreion

o balance coss wih sufcien sringency o mee environmenal goals and

demonsrae equivalence wih EU regulaion or implemen an ICAO policy.Policy and poliical consideraions, no he Clean Air Ac, would deermine he

sringency o EPA sandards.

Revenues

Cos-eecively reducing greenhouse gas emissions via regulaion is imporan,

bu i such regulaion generaes revenues ha can hen be spen on projecs o

reduce emissions in developing counries or help hose counries adap o climae

changeso-called inernaional climae nancehe regulaion can be doubly

eecive in reducing emissions. A he 2009 climae alks in Copenhagen, devel-

oped counries agreed o raise $100 billion in such nancing. Unorunaely, he

world has made relaively litle progress owards meeing ha goal, wih only $30

billion pledged hus ar.46 Wih hundreds o billions o dollars spen annually in

developed counries or air ravel, many counries and NGOs see aviaion as a

poenial source or inernaional climae nance.47

In principle, aviaion greenhouse gas regulaions like hose we jus described

could raise revenueor example, hrough aucion o radable emissions allow-ances. In pracice, however, he EPA lacks he legal auhoriy o raise revenues.

Under he Consiuion, revenue-raising auhoriyaxaion powerlies wih

Congress,48 and Congress has no delegaed his power o he EPA in he relevan

In principle,

aviation

greenhouse ga

regulations cou

raise revenue

or example,

through auction

tradable emiss

allowances. In

practice, howev

the EPA lacks th

legal authority

raise revenues


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pars o he Clean Air Ac. Te EPA isel has argued ha his makes direc rev-

enue raising under he Clean Air Ac difcul, i no impossible.49 Tere is also no

preceden or he EPA raising revenue direcly hrough emissions sandards excep

hrough nes. Sill, some legal scholars argue ha revenues raised rom permi

aucions could be classed as permissible nes raher han impermissible axes,

hough his is a minoriy view.50

Moreover, even i he EPA were o somehow raiserevenue under he airline regulaions he money would go direcly o he U.S.

reasury and hus could no be direced by he EPA o developing counries or

emissions miigaion.51

Many Clean Air Ac programs also delegae auhoriy o saes, which can and

have raised revenues rom emissions regulaion, including hrough he use o

allowance aucions. Secion 231 explicily excludes saes, however, rom aviaion

emissions regulaion.


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Conclusion

The aviation sector is responsible or a small but signifcantand growing part o the worlds greenhouse gas emissions.The European Unions recent decision to regulate aviation

emissions and the recent lawsuit in U.S. courts have orced

the United States to consider regulating aviation emissions

on its own terms, ailing an agreement being reached in the

International Civil Aviation Organization. Likewise, political

gridlock in Congress makes the Clean Air Act the only currently

viable option or regulating aviation emissions.


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We conend ha he EPA could cra aviaion emissions regulaions under he Clean

Air Ac ha could achieve boh environmenal and indusry goals while saisying

he EU equivalency requiremen or implemening an ICAO policy. Tese regula-

ions could be boh broad and exible, covering exising and new aircra engines

and allowing compliance hrough airrame and operaional changes. Te EPA migh

also be able o use marke-based regulaory ools, urher increasing exibiliy andlikely cos eeciveness.

We recognize, however, ha here are imporan limiaions as well as challenges.

Clean Air Ac regulaion could no generae revenue o und inernaional cli-

mae nance or oher prioriies. Furher, he regulaion would likely no cover

emissions ouside o U.S. airspace, hough i would indirecly reduce hem. Also,

inernaional law may complicae regulaion o oreign-ag airlines. And as wih

any conenious regulaion under he Clean Air Ac, poliical, adminisraive, and

legal challenges are likely.


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About the authors

Samuel Grausz is an associae a Climae Advisers and manages is energy prac-

ice. Samuel also holds a research posiion a Resources or he Fuure, where he

works wih economic scholars on a broad se o energy and environmen policy

issues. Samuel previously worked a Naional Economic Research Associaes, aleading economic consuling rm.

Nathan Richardson is an atorney and a residen scholar a Resources or he

Fuure whose research ineress include inernaional and regulaory law, paricu-

larly environmenal law and regulaion o risk. His research a Resources or he

Fuure encompasses a range o climae change issues, including EPA regulaion o

greenhouse gases, analysis o proposed or poenial climae legislaion, and iner-

naional climae agreemens. He also sudies environmenal liabiliy and regula-

ory insiuions and pracices.

Acknowledgements

Tanks o Annie Pesonk, Pamela Campos, and Jenny Cooper o he

Environmenal Deense Fund, Bill Hemmings o rade and Environmen, Sarah

Bur o Earh Jusice, Marcie Keever o Friends o he Earh, im Johnson o he

Aviaion Environmen Federaion, and Bill Wehrum o Hunon & Williams LLP

or heir research suggesions and commens on his paper.


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1 Samuel Grausz and Nigel Purvis, Is the Sky Falling orAirline Prots in the European Union? (Washington:Climate Advisers, 2012), available at http://www.climateadvisers.com/pd/Grausz%20and%20Purvis_Is%20The%20Sky%20Falling.pd.

2 Reuters, International Airlines Will Be Charged orCarbon Emissions, EU Court Rules,The Guardian,December 21, 2011, available at http://www.guardian.co.uk/environment/2011/dec/21/international-airlines-carbon-emissions.

3 Greenair Online, US Airlines Give up on Legal CaseAgainst Inclusion into the EU ETS but Call on TheirGovernment to Step up Retaliatory Action, March 29,2012, available at http://www.greenaironline.com/news.php?viewStory=1444.

4 Greenair Online, States Opposed to Europes EmissionsTrading Scheme Win ICAO Council Backing but EURemains Deant, November 3, 2011, available at http://www.greenaironline.com/news.php?viewStory=1366.

5 Ben Mutzabaugh, China Blocks Airbus Orders AmidHellish Battle with EU, USA Today, March 16, 2012,available at http://travel.usatoday.com/ights/post/2012/03/china-blocks-airbus-orders-amid-hellish-battle-with-eu/649703/1.

6 See Directive 2008/101 o the European Parliament ando the Council o 19 November 2008 Amending Direc-tive 2003/87/EC so as to Include Aviation Activities inthe Scheme or Greenhouse Gas Emission Allowance

Trading Within the Community 17, 2009 O.J. (L 8) 3(EC), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:008:0003:0003:EN:PDF[hereinater EU Directive]. The Directive explicitly men-tions only other countries policies limiting emissionsrom ights to the EU, but indicates that the EU shouldseek optimal interaction with other countries policiesand avoid double regulation. This leaves ample roomto exempt any emissions covered by another countrysregulatory scheme rom the ETS.

7 42 U.S.C. 7401

8 Clean Air Act, 42 U.S.C. 7401-7671q (Westlaw 2010)[hereinater CAA]. 231(a)(2)(A)

9 CAA 231(a)(2)(B)(i); 232.

10 49 U.S.C. 44714

11 CAA 231(a)(2)(B)(ii).

12 CAA 231(b).

13 Environmental Protection Agency, Control o Pollutionrom Aircrat and Aircrat Engines, (38 Fed. Reg. 19088,1973).

14 Arnold W. Reitze,Air Pollution Control Law: Complianceand Enorcement (Washington: Environmental LawInstitute, 2001), p. 316.

15 Ibid.

16 Massachusetts v. EPA, 549 U.S. 497, 52829 (2007).

17 Environmental Protection Agency,Advance Notice oProposed Rulemaking: Regulating Greenhouse Gas Emis-sions under the Clean Air Act, (73 Fed. Reg. 44,354, 2008)[hereinater ANPR].

18 Settlement Agreement, State o New York, et al. v. EPA,No. 06-1332, D.C. Cir. (2007), available at http://www.epa.gov/airquality/cps/pds/boilerghgsettlement.pd.

19 Compare David McCollum and others, Greenhouse GasEmissions rom Aviation and Marine Transportation: Miti-gation Potential and Policies (Washington: Pew Centeron Global Climate Change Solutions White Paper Series,2009), available at http://www.c2es.org/docUploads/aviation-and-marine-report-2009.pd (estimating 2005domestic aviation GHG emissions o 180 million metrictons o CO2-equivalent or 250 tons when U.S. carriersinternational emissions are included) with Environmen-tal Protection Agency, Regulator Impact Analysis or theMandatory Reporting o Greenhouse Gas Emissions FinalRule (GHG Reporting); Final Report, (2009), available athttp://www.epa.gov/climatechange/emissions/down-loads09/GHG_RIA.pd (estimating GHG emissions romU.S. petroleum reneries o 204.7 tons in 2006)

20 See State o Caliornia and others, Petition or RuleMaking Seeking the Regulation o Greenhouse GasEmissions rom Aircrat (2007), available at http://ag.ca.gov/cms_attachments/press/pds/n1501_aircrat_peti-tion_nal.pd[hereinater State Petition]; see also Friendso the Earth and others, Petition or Rulemaking Under theClean Air Act to Reduce the Emission o Air Pollutants romAircrat that Contribute to Global Climate Change (2007),available athttp://docs.nrdc.org/globalwarming/les/glo_07123101a.pd [hereinater Environmental Petition].The petitioners also sought EPA regulation o GHG emis-sions rom maritime and non-road mobile sources.

21 Specically, the plaintifs claim that the agency must is-sue endangerment and cause/contribute ndings oraircrat GHG emissions. The plaintifs and the agencyagree that such ndings would compel the agency toregulate those emissions. See Complaint or Declara-tory and Injunctive Relie at 28-30, Center or BiologicalDiversity et al v. EPA, No. 10-985 (D.C. Cir. Jun. 11, 2010).

22 CBD v. EPA, Order Filed March 21, 2012 ( Case 1:10-cv-00985-FJS Document 43, D.C. D.C.), text available athttp://www.shb.com/newsletters/ECU/Etc/CBDvEPA.pd

23 Mark Drajem, EPA wont curb greenhouse gases romships, of-road trucks, Bloomberg News, June 18, 2012.

24 CAA 231.

25 Note that Section 202 o the Clean Air Act, which grantsauthority to regulate motor vehicle emissions, speci-cally restricts the agencys reach to new vehicles andengines. Section 231 contains no similar restriction. SeeCAA 202. The legislative history o the 1970 CAA alsosupports this reading o congressional intent. See 116Cong. Rec. 691210 (1970) (Statement o Sen. Muskiediscussing the reasons or regulating emissions rom jetengines and identiying methods o regulation or both

new and existing jet engines), 116 Cong. Rec. 700610(1970) (Representative Skubitz describing the efect oaviation emissions standard as driving retrots o newand existing aviation engines), 116 Cong. Rec. 700922(1970) (Senator Cooper describing the intent o the CAAas to regulate both new and existing aviation engines).

Endnotes
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:008:0003:0003:EN:PDFhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:008:0003:0003:EN:PDFhttp://www.epa.gov/airquality/cps/pdfs/boilerghgsettlement.pdfhttp://www.epa.gov/airquality/cps/pdfs/boilerghgsettlement.pdfhttp://www.c2es.org/docUploads/aviation-and-marine-report-2009.pdfhttp://www.c2es.org/docUploads/aviation-and-marine-report-2009.pdfhttp://www.epa.gov/climatechange/emissions/downloads09/GHG_RIA.pdfhttp://www.epa.gov/climatechange/emissions/downloads09/GHG_RIA.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://docs.nrdc.org/globalwarming/files/glo_07123101a.pdfhttp://docs.nrdc.org/globalwarming/files/glo_07123101a.pdfhttp://docs.nrdc.org/globalwarming/files/glo_07123101a.pdfhttp://docs.nrdc.org/globalwarming/files/glo_07123101a.pdfhttp://docs.nrdc.org/globalwarming/files/glo_07123101a.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://ag.ca.gov/cms_attachments/press/pdfs/n1501_aircraft_petition_final.pdfhttp://www.epa.gov/climatechange/emissions/downloads09/GHG_RIA.pdfhttp://www.epa.gov/climatechange/emissions/downloads09/GHG_RIA.pdfhttp://www.c2es.org/docUploads/aviation-and-marine-report-2009.pdfhttp://www.c2es.org/docUploads/aviation-and-marine-report-2009.pdfhttp://www.epa.gov/airquality/cps/pdfs/boilerghgsettlement.pdfhttp://www.epa.gov/airquality/cps/pdfs/boilerghgsettlement.pdfhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:008:0003:0003:EN:PDFhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:008:0003:0003:EN:PDF


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26 Ibid.

27 A counterargument is that the statute could haveexplicitly given the agency authority to regulate vehiclesas well as engines, as it does or motor vehicles, but doesnot or aircrat. Parts o the legislative history indicateintent to give broad authority over aircrat, but this is notconclusive. See 116 Cong. Rec. 701218 (1970), 42386.Opponents o regulation could litigate this question,though industry may have no wish to do so as victorywould only serve to limit their compliance options.

28 See ANPR at 44470-71

29 CAA 231.

30 Convention on International Civil Aviation (ChicagoConvention), Dec. 4, 1944, T.I.A.S. 1591, 15 U.N.T.S. 295.

31 See International Air Transport Association, IATADisappointed with CJEU OpinionUrges GlobalSolution through ICAO, Press release, O ctober 6, 2011,available athttp://www.iata.org/pressroom/pr/pag-es/2011-10-06-01.aspx (While the Advocate Generalo the CJEU believes that Europe is within its rights tomove orward with this extra-territorial measure, thatopinion is not shared in the international community.Many governments are rightly concerned about theinringements on sovereignty and the Chicago Conven-tion that Europes plans pose.).

32 Environmental Protection Agency, Control o AirPollution rom Aircrat and Aircrat Engines; EmissionStandards and Test Procedures (70 Fed. Reg. 69664, 696 67,2005) (stating that i a nation sets tighter standards thanICAO, air carriers not based in that nation (oreign-agcarriers) would only be required to comply with the ICAOstandards.)

33 See Nathan Richardson, Aviation, Carbon, and EPA(Resources or the Future, 2012) (discussing academicand government views on both sides).

34 See Pamla Karten Bookman, Solving the Extrater-ritoriality Problem: Lessons From the Honest ServicesStatute, Virginia Law Rev. 92 (2006: 749, 751. (Extrater-ritoriality doctrine creates a presumption against theapplication o domestic statutes to conduct committedabroad. It presumes that Congress intends to regulateonly domestic conduct unless it species otherwise.

The presumption is triggered when two criteria aremet: (1) the alleged conduct is committed abroadand (2) the statute regulating that conduct does n otspeciy whether it is intended to apply domestically orabroad.)

35 See ANPR at 44472.

36 Ibid.

37 See Nathan Richardson, Playing Without Aces: Ofsetsand the Limits o Flexibility Under Clean Air ActClimate Policy (Washington: Resources or the FutureDiscussion Paper 11-49, 2011), available at http://www.rf.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699); see also generally GregoryWannier and others, Prevailing View on ComplianceFlexibility under 111 o the Clean Air Act (Washing-ton: Resources or the Future Discussion Paper, 2011),

available at http://www.rf.org/RFF/Documents/RFF-DP-11-29.pd.

38 This simple syllogism is complicated by the act thatscholars believe that stationary source standards (Sec-tion 111) can permit trading in part because the statutespecically requires perormance standards to reectthe best system o emission reduction. Trading, the ar-gument goes, is the best system. Section 231 does notreer to a best system or have any equivalent language,making this logic unavailable or Section 231. As notedabove, however, Section 231 does not limit EPA as to thebasis it chooses or aviation emissions regulations. Assuch, EPA appears to have the ability to base standardson the best system or any other principle, granting

it the ability to implement at least the same exibilitymechanisms as it can apply to stationary sources.

39 See, e.g., EPA, 40 CFR Parts 51, 72, 75, and 96 Findingo Signifcant Contribution and Rulemaking or CertainStates in the Ozone Transport Assessment Group Regionor Purposes o Reducing Regional Transport o Ozone;Rule (NOx SIP Call), (63 Fed. Reg. 57356, 57359, 1998)(requiring states to submit new implementation plansthat would reduce NOx emissions and explicitly speciyingcap and trade as a compliance option).

40 See EPA, Light-Duty Vehicle Greenhouse Gas EmissionStandards and Corporate Average Fuel Economy Standards;Final Rule, (75 Fed. Reg. 25324, 25329, 2010) (creatingnationwide regulatory program under which automakersmust meet a specifed eet average emissions level).

41 Other notable examples include the Cross-State Air

Pollution Rule and the heavy-duty engine per ormancebanking and trading program.

42 National Association O Clean Air Agencies v. EPA, 489 F.3d1221 at 1225, 1229-1232 (2007).

43 CAA 231. Whitman v. American Trucking Associations,531 U.S. 457, 464 (2001).

44 CAA 109(b).

45 CAA 111(a).

46 $30 billion commitment made or ast start nanceas part o the Copenhagen accord. For additionalormation and to monitor the progress towards meet-ing these commitments, see www.aststartnance.org or Cliford Polycarp, Have Countries Delivered onFast-Start Climate Finance, World Resources Institute,

May 20, 2011, available at http://www.wri.org/stories/2011/05/have-countries-delivered-ast-start-climate-nance.

47 Michael Keen, Ian Parry, and Jon Strand, Market-BasedInstruments or International Aviation and Shipping asa Source o Climate Finance (Washington: World Bankand International Monetary Fund, 2012).

48 The power to raise revenue is restricted to Congress(and specically the House, at least initially) under theConstitution, Art 1 Sec 7 Cl 1.

49 EPA has argued that this and other actors make it di-cult or impossible or the agency to raise revenue viaallowance auctions; see ANPR at 44411.

50 Inimai M. Chettiar and Jason A. Schwartz, The RoadAhead: EPAs Options and Obligations For Regulating

Greenhouse Gases, Institute For Policy Integrity (NewYork University School o Law, 2009), p. 26, available athttp://policyintegrity.org/les/publications/TheRoadA-head.pd.

51 See Miscellaneous Receipts Act, 31 U.S.C. 3302(b)(2006).
http://www.iata.org/pressroom/pr/pages/2011-10-06-01.aspxhttp://www.iata.org/pressroom/pr/pages/2011-10-06-01.aspxhttp://www.iata.org/pressroom/pr/pages/2011-10-06-01.aspxhttp://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.rff.org/RFF/Documents/RFF-DP-11-29.pdfhttp://www.rff.org/RFF/Documents/RFF-DP-11-29.pdfhttp://www.faststartfinance.org/http://www.faststartfinance.org/http://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://policyintegrity.org/files/publications/TheRoadAhead.pdfhttp://policyintegrity.org/files/publications/TheRoadAhead.pdfhttp://policyintegrity.org/files/publications/TheRoadAhead.pdfhttp://policyintegrity.org/files/publications/TheRoadAhead.pdfhttp://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://www.wri.org/stories/2011/05/have-countries-delivered-fast-start-climate-financehttp://www.faststartfinance.org/http://www.faststartfinance.org/http://www.rff.org/RFF/Documents/RFF-DP-11-29.pdfhttp://www.rff.org/RFF/Documents/RFF-DP-11-29.pdfhttp://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21699http://www.iata.org/pressroom/pr/pages/2011-10-06-01.aspxhttp://www.iata.org/pressroom/pr/pages/2011-10-06-01.aspx


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