US cap and trade scheme could cost billions: ATA

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Domestic cap and trade legislation making its way through the US House of Representatives could cost US airlines roughly $5 billion in 2012 and $10 billion in 2020.

Air Transport Association of America (ATA) president and CEO James May issued that warning today during the Air Transport World Eco-Aviation Conference in Washington, DC.

The American Clean Energy and Security Act of 2009 would create a tradable federal permits programme to reduce global warming pollution from transportation entities, electric utilities, oil companies and large industrial sources. The legislation would cover airlines through fuel that carriers purchase, "essentially acting as tax", May says.

According to figures from the American Petroleum Institute, the legislation could increase jet fuel costs between $1.40 per gallon and $1.70 per gallon, he explains.

The House Energy and Commerce Committee on 21 May approved draft legislation introduced by Representatives Henry Waxman and Edward Markey. The legislation has been referred to seven other House committees for review, and final passage into law also requires Senate action. ATA hopes that upon further review, Congress will revise its "punitive attitude toward aviation" May says, adding that it does not make sense for energy-efficient airlines to pay "huge subsidies" to other industries.

"We have an education process in front of us," he says.

Targets in the proposed legislation initially aimed to cut emissions below 2005 levels by 20% in 2020, but those levels were cut to 17% earlier this month. But other targets remain--lowered emissions below 2005 levels by 3% in 2012, 42% in 2030 and 83% in 2050.

If the cap and trade programme takes effect, airlines need free allowances or credits as given out to other industries to account for aviation's record of improved fuel efficiency and reduced emissions, May says.

Regulators must also create controls to prevent speculation on the carbon market, he says.

The latest environmental proposals in the US follow last year's introduction of the Lieberman-Warner Climate Security Act, which would have required airlines and other large industries to pay for their emissions. That proposed legislation failed in the Senate.

Passage of new legislation this year is more likely as House leadership has said it will focus on the Waxman-Markey proposal at the same time that a Democratic White House has made reforming US energy policy a priority.

US legislators are considering domestic cap and trade proposals as the European Union (EU) prepares to include emissions from flights within, to and from the EU it its emissions trading scheme (ETS) starting in 2012.

May says it is estimated that the EU ETS would impose an annual cost to airlines of several billion dollars in 2012.