With the release of President Obama’s first budget, the battle is once again joined to oppose Emissions Trading Schemes (ETS) that would rob aviation of the very money needed to further reduce their already very limited carbon footprint (2-3 percent of worldwide emissions).

President Obama declared that no segment of the economy will be exempt from this critical effort to stem global climate change. So, here’s a thought that is a little outside the box: Let’s include the government itself in ETSs.

Think about it. What better way is there to illustrate the impact of ETSs?

The airline industry, alone, has spent billions of dollars to increase fuel efficiency, first because it was good for the bottom line, and now, because it is critical for survival. More has been spent to reduce its noise footprint. But, even if the industry were to spend its way down to a zero footprint, it will never be able to eek out that last 10 to 15 percent until the system is modernized. Oh by the way, let us not forget the task of modernization has been going on for 40 years. Remember, that is why the aviation trust fund was created in the first place. Related Story

But we can live in hope. After all, in my lifetime, I never thought I would see the fall of the Berlin Wall which opened up the East so that I could adopt my daughter from Romania a year later. I also never thought I’d see the fall of the Soviet Union nor did I ever think I’d see Nelson Mandela walk free much less become president of South Africa. Now I have seen the inauguration of the first African American President of the United States, a barrier I thought too high to breach in my lifetime with all we have yet to do in race relations.

But enough of the rosy hyperbole – making government entities pay into any cap-and-trade scheme perhaps will make them realize what folly such a system is. Because, like airlines, it would rob them of the very funding needed to modernize. What’s not to get?

“We are poised on the precipice,” said Air Transport Association’s Vice President Environmental Affairs Nancy Young, in making Aviation Today’s Daily Brief current on environmental issues. “Senator Boxer released principals on climate change and reaffirmed her interest in ETS. On the House side, Energy and Commerce Committee Chair [Henry] Waxman announced he wants to move cap-and-trade legislation this year and he unseated former chair John Dingell on that platform. President Obama, and his cabinet, is continuing to support ETS on an economy-wide basis. In fact, they are already counting the revenues they will collect under ETS beginning in 2012. Right now we don’t have the legislation. It is being formulated but we can expect legislation to make significant progress in advancing at least in terms of the committee work.”

While such legislation has been offered before, it takes on new meaning this year with the advent of the year-end meeting in Copenhagen to hammer out details for carbon reduction goals that, experts say, have to be a lot tougher than Kyoto.

“Two things are happening in parallel,” explained Young. “The process in Copenhagen on the world stage is part of the United Nations Framework Convention on Climate Change (UNFCC). Countries agree that reducing carbon emissions is a good idea, but by how much was left to a later treaty than Kyoto which expires in 2012. The Obama Administration and others, including Boxer and Waxman, have said clearly that they want us to participate in any treaty that replaces Kyoto. The parallel process is what is going on domestically and how that informs what we want to see in the worldwide treaty. That will determine what the right thing is for the United States with an ETS or something else. Waxman and Boxer are taking action to set the paradigms for the U.S. and position us for treaty negotiations.”

Now comes word from ATDB’s sister publication Energy Daily that the world is flooded with surplus carbon because of the economic crisis which has slowed output. “After peaking at nearly 30 euros (38 dollars) in mid-2008, CO2 traded at 9.95 euros (12.60 dollars) a ton on Friday, according to BlueNext, one of several European carbon exchanges,” wrote the Daily, citing the impact on the energy, steel and cement sectors which now comprise most of the ETS members. “As world leaders scramble to buoy the global financial system, the economic crisis has quietly claimed yet another victim: Europe's nascent market for carbon pollution.”

“Cap and trade has tanked for a lot of reasons,” said Young. “Philosophically its just the wrong thing to do. But it illustrates that a cap-and-trade system is very volatile. You say carbon is a commodity but it is sort of an invisible commodity. And like any commodity, the market is subject to significant manipulations and spikes in price and significant reduction in price from an economic downtown. From a business perspective that makes it hard to do planning and to plan on what costs going to be. If you create scarcity through regulations, it is going to go up and down reacting to external events.”

Young also indicated that whatever emerges at Copenhagen will be tougher than Kyoto. “That is what the negotiators are saying, certainly in the European Union which wants to reduce emissions by 20 percent by 2020. President Obama’s target as expressed in the budget is a 14 percent reduction by 2020.” Obama wants emissions cut by 83 percent by 2050.

“From industry perspective,” she continued, “the question is how targets are expressed for a particular industry. When you have an industry like aviation which is very fuel efficient, you should have a modernized air traffic control system but Congress hasn’t seen fit to get that done and there are a lot of emissions caused by that failure. You need to calibrate the system to be appropriate to the industry’s contribution. We certainly care about the big picture targets countries are going to adopt, but from a parochially view, we are more interested in that calibration. Modernization will never happen in one year. It takes a multiyear effort to get that kind of savings. It will happen incrementally. What we would like to see it prioritized bringing Netxtgen on line with an intensity.”

She pointed to prioritizing on the hot spots first doing those in the earlier years. “You’ll gain more environmental improvements by doing that,” she concluded.

It is for that reason that the industry has formed a new coalition to move ahead with some of the recommendations made in 2007 to improve the New York airspace. Related Story  On Feb. 25, Port Authority of New York and New Jersey (PANY&NJ) announced the formation The National Alliance to Advance NextGen to urge federal funding for an immediate overhaul of the nation's air traffic control technology.

A Port Authority-led coalition featuring an array of business, travel, tourism and airline officials are urging full funding for NextGen initiatives to overhaul the country's air traffic control system and significantly reduce delays that plague the nation's air travelers.

The National Alliance to Advance NextGen has called for an FAA Reauthorization Bill that includes the billions of dollars necessary to advance, install and operate NextGen technology as quickly as possible, and to do so in the New York metropolitan region first to provide the most widespread benefit, as studies have shown that 75 percent of the nation's air traffic delays have their genesis at one of the region's airports. Related Story

“I think we continue to demonstrate that we are very committed to fuel efficiency improvements that are directed a reducing GHGs,” said Young. “We really have within our industry the mechanisms to get this right. The idea of a market-based mechanism like ETS is to have eco regulations put in place where the market is not incentivizing to get you to the goal. Fuel is our number one cost center. The market has already incentivized us to do the right thing. Regulations only take funds out of the system for what we need to do.”

That is money that could save the entire economy beaucoup bucks. On average, according to the Air Transport Association, in the twelve-month period ending September 2008, 138 million system delay minutes drove an estimated $10 billion in direct operating costs for scheduled U.S. passenger airlines. The cost of aircraft block (taxi plus airborne) time was $72.13 per minute, 19 percent higher when compared to CY 2007 costs. Fuel costs in particular, increased 41 percent to $39.35 per minute. Crew costs are estimated to have cost $13.08 per minute, followed by maintenance and aircraft ownership ($10.09 and $7.72, respectively) and all other costs ($1.88).

ATA also points out that delayed aircraft also drive the need for extra gates and ground personnel and impose costs on airline customers (including shippers) in the form of lost productivity, wages and goodwill. Assuming $35.70 per hour as the average value of a passenger's time, as recommended by the FAA, adjusted for BLS employment costs, delay costs to air travelers are considerable and estimated the total cost to passengers to be $4.5 billion.

Total costs including airlines ($10 billion) + passenger/shipper time ($4.5 billion) = $14.5 billion. Can someone tell me why these statistics are not getting through to the executive and legislative branches of government? Can someone tell me why it is okay that this much money is wasted at the ultimate cost of American competitiveness.” Related Story

But young pointed out one more hurdle to why it will be so difficult to make headway – the industry itself. For instance, GE, a powerhouse in the aviation industry with its aircraft engines, has made it very clear, she said, that it supports ETS. Its diversified portfolio means that it is also a powerhouse in the energy industry with turbines it produces for every type of electricity generation. That portfolio includes a role in wind turbines and patents of clean energy technology. So, even it its commercial engine division suffers, it knows, overall, it will be a winner with an ETS scheme because it will drive new sales for its clean energy technology.

Even so we are left with a good question. Should the government have to pay into the cap-and-trade scheme for its actions that do not allow industry to minimize carbon emissions?

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