US House passes domestic cap and trade

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The US House of Representatives voted in favour of creating a domestic cap and trade programme for greenhouse gas (GHG) emissions on 26 June, paving the way for President Barack Obama's administration to achieve its goal of energy reform.

Final passage requires Senate approval, and if made into law as is, the American Clean Energy and Security Act of 2009 would limit emissions such as carbon dioxide (CO2) between 2012 and 2050, and would require regulated entities-including transport entities, oil companies, electric utilities and large industrial sources to hold allowances to emit GHGs.

House majority leader Steny Hoyer said during the floor debate that the legislation is needed as climate change is a "global problem. America must lead. America must set the example."

Introduced by US Representatives Henry Waxman and Edward Markey, the House bill also directs the Environmental Protection Agency (EPA) to create emissions standards for new aircraft and new engines by 31 December 2012. Targets include cutting emissions below 2005 levels by 3% in 2012, by 17% in 2020, by 42% in 2030 and by 83% in 2050.

At the same time, the bill calls on the US to promote, via ICAO, the creation of a "global framework" to regulate civil aircraft GHGs. Such a measure should account for the "international nature of the industry". To that end, the House bill also directs the United States to work with foreign governments toward an agreement that "reconciles foreign carbon emissions reduction programs to minimize duplicative requirements".

Congress has taken up domestic cap and trade legislation as the European Union prepares to include emissions from flights within, to and from the EU in its emissions trading scheme (ETS) starting in 2012. But the European Commission has indicated there will be no emissions double jeopardy for non-European airlines if their homeland adopts an ETS.

Neither emissions scheme has much support from aviation trade groups. The Air Transport Association of America (ATA) has estimated that the EU scheme would impose an annual cost to airlines of several billion dollars in 2012. It also calculated that the US cap and trade programme would cost US airlines roughly $5 billion in 2012 and $10 billion in 2020.

"This cap and trade bill creates an onerous fuel tax on the airline industry. Fuel costs will skyrocket, hindering the ability of US airlines to continue to improve their environmental performance through fleet modernization and technological advances, weakening their ability to compete in the global markets," ATA president and CEO James May says in a statement.

Meanwhile, the US Congressional Budget Office (CBO) has also estimated that the gross cost of complying with the House cap and trade program would be roughly $110 billion in 2020.