APPENDIX 13
Memorandum from the United States Federal
Aviation Administration
1. The Federal Aviation Administration (FAA)
is the United States counterpart to the United Kingdoms Civil
Aviation Authority, regulates aviation noise and emissions (in
cooperation with the U.S. Environmental Protection Agency) in
the United States, and represents the United States at the Committee
on Environmental Protection (CAEP) within the International Civil
Aviation Organization (ICAO).
2. Thank you for the opportunity to provide
some information on the matters before the Committee. In addressing
the use of economic instruments in dealing with aviation's impact
on the environment, we believe a number of points should be kept
in mind.
3. In our view, there remain tremendous
uncertainties in the science dealing with the nature and impacts
of CO2 on climate change. To mention a few issues, there remains
scientific debate on the level of observed warming, the sensitivity
of the earth's climate, water vapor feedback mechanisms and impact,
the impact of NOx versus CO2, and the size and role of the anthropogenic
portion of the greenhouse effect vs. other mechanisms. Further,
estimates of the impact of aviation CO2 are imprecise because
of uncertainties in predicting the amount of emissions that commercial
aviation will produce in the future as well as the inaccuracies
of current methods for quantifying their impact on the atmosphere.
4. Translating uncertainties into models
which try in turn to transform it into economic valuation only
increase the scope for ambiguity and error. Economic models of
CO2 costs are very sensitive to selection of discount rates and
intergenerational equity, assumptions about technological change,
differing valuations of the actual damage incurred from increases
in CO2 as well as the benefits of removing CO2.
5. The uncertainties in basic understanding
of CO2 impacts and economic valuations only increase once you
place this in an international setting. The economic valuation
for carbon emissions used in the UK Department of Transport report
does not adequately reflect the range of uncertainties in such
a valuation. Studies, including those produced in the United Kingdom,
show a much wider range than indicated in the Department of Transport
report. For example, the £70 per ton of carbon suggested
valuation for year 2000 can be converted into $29 per ton of carbon
dioxide. According to some of the literature published globally
over the past decade, estimates of CO2 emissions costs range from
$2-$127 per ton before adjusting for a discount rate. Depending
on the discount rate employed, these values would then change
yet again. As can be easily seen, there is no general international
consensus on the economic valuation of CO2 emissions that could
be applied in internalizing any externality.
6. Further, the Committee of Aviation Environmental
Protection (CAEP) of the International Civil Aviation Organization
(ICAO), of which the United Kingdom is an active participant,
is currently studying the use of market-based options. This includes
emissions charges as well as voluntary agreements and emissions
trading approaches as a means for addressing environmental cost
issues related to CO2 emissions from aircraft engines. CAEP has
reached no conclusions from its studies as it is dealing with
the many complex issues mentioned above as well as intricate legal
and administrative issues that arise in grappling with the international
aviation system. Consequently, possibly applying a CO2 charge
to international aviation activity is premature. What should be
noted here is that prior ICAO cost/benefit analysis has shown
that charges were as much as 40 times more expensive than an "open"
emissions trading regime to achieve the same emissions reductions.
7. It seems ill-timed to institute a CO2
charge on the aviation industry—whether judged from a financial
standpoint or their actual CO2 emissions. Having lost over $20
billion in the last two years and enroute to another staggering
loss, this does not appear to be an appropriate time to place
an additional cost on the industry, especially when CO2 emissions
are already down. While many forecasts had assumed aviation to
be the fastest growing source of transport CO2 prior to September
11, changes in operations and fleet structures have resulted in
CO2 emissions from aviation actually decreasing over the past
two years. For example, compared to 2000, the U.S. commercial
fleet consumed 12 per cent less fuel in 2002. Given the size of
the U.S. aviation sector in the world, it is not hard to see that
this resulted in a substantial reduction in CO2 emissions from
aviation worldwide.
8. If the United Kingdom judges some action
is required, I believe it should confined its application to its
own aviation sector. For example, a CO2 emissions charge could
be applied to its domestic commercial airline operators—just
as in the United States we have had a fuel tax applied to our
domestic operators for the last decade. In the meantime, we look
forward to continuing to work with the United Kingdom within the
ICAO process to study and develop guidance on a variety of market-based
options to address cost-effectively CO2 emissions reductions internationally.
April 2003
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