Background Briefing: Senior Administration Official Provides a Readout of the European Union Emissions Trading System ETS Meeting

01 August 2012

MODERATOR: Good afternoon, folks. This is [Moderator]. We’re going to do a background call with [Senior Administration Official], attributable to a Senior Administration Official. I’m going to hand it over to our speaker at this point, and then we’ll have some time to take your calls at the end.

SENIOR ADMINISTRATION OFFICIAL: Thank you very much, [Moderator]. Hello to everybody. I’m going to be very brief at the top and then happy to take some questions.

We just hosted a meeting today and yesterday of 16 other countries and the United States focused on international aviation emissions. We are among a large number of countries, probably most everybody outside of Europe that have opposed the application of Europe’s emission trading system to foreign air carriers on both legal and policy grounds. But at the same time as we have opposed the application of the ETS in that manner, we have been strongly supportive and many countries strongly supportive of the objective of reducing emissions from aviation.

And we convened this informal small group conversation in Washington with a group of major aviation countries really in the interest of supporting the process of making progress on reducing emissions in the International Civil Aviation Organization, ICAO, which is the multilateral body charged with handling international aviation. And we wanted to bring that group together to discuss ongoing progress and continued progress that can be made and also to explore whether there seemed to be some basis for an overall global solution that would have the additional effect of causing the EU’s ETS to be set aside with regard to foreign carriers.

That was the purpose of the meeting, and it was not – I actually did a briefing the day before the meeting and said at the time that we anticipated no deliverable, that we were not expecting this initial and exploratory session to produce agreements or anything of that sort, and that we’ve been – and indeed there were no deliverables. We did prepare a chair summary which you all ought to have, actually. I think we sent it out probably a half hour ago or so.

And I think in a nutshell, the meeting confirmed – which is no surprise – confirmed the very solid and strong opposition to the ETS as applied to foreign carriers, but also indicated that there was a lot of interest among countries in continuing to work on the suite of activities that ICAO has been working on. And those include developing a CO2 efficiency standard for aircraft and engines. There was, in that respect, a quite important development just within the last week or so from the Committee on Aviation Environmental Protections known as CAEP, C-A-E-P, which is a committee of ICAO, that after some significant period of struggling to do so developed the metric necessary for developing this standard. So that work – that was a key development in the effort to develop a CO2 standard, which is essentially a – think of this is as an efficiency standard for airplanes, and that is a quite important development.

There have been something in the order of 46 national action plans that have been submitted to ICAO. This was another core element of the 2010 Assembly resolution. The Assembly – the main governing body of the – of ICAO – it’s all the countries in ICAO – meets once every three years. So 2010 is the last Assembly meeting in the fall, and there will be another one next year in the fall.

Experts are also working on the development of the global standards needed to enhance the improvement of airline operations, things like air traffic management, which are actually enormously important, a big part of reducing emissions. In the U.S. we pursue those efforts under the so called NextGen program at FAA. And then there’s also a lot of support expressed for the work at an expert level that’s going on at ICAO.

With respect to two different elements of developing so-called – or looking into the development of so-called market-based measures, the one of those involves looking at national or regional market measures and essentially developing guidelines or parameters for such systems. And there was a strong call in the 2010 Assembly resolution to develop such a framework, as it was called, in that – in the resolution.

And then there was separately a call in the resolution that was at a more exploratory level, to explore the feasibility of whether a single global market measure, which could involve something like an offsetting scheme or mechanism, would work. And I think that effort will go probably on a longer-range basis consistent with a 2010 Assembly.

Anyway, there was a lot of support for all of those kinds of efforts, not support for the EU effort to apply its own system to everybody else, and there was a lot of useful and candid conversation. And I – why don’t I just stop there so I don’t – I don’t mean to be monopolizing all the time – and open the floor to questions. Thanks.

OPERATOR: Ladies and gentlemen, if you wish to ask a question, please press * then 1 on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from queue at any time by pressing the # key. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have any questions please press *1 at this time. We do ask that you limit yourself to one question.

One moment for the first question. And our first question is from Valerie Volcovici from Reuters. Your line is open. Please, go ahead.

QUESTION: Yes. Hi, [Senior Administration Official]. Thanks for taking the call. Just a question about a timeline. I’m – I was just wondering if there was any progress on setting a timeline for narrowing down some of these options for the different framework measures. And also, will you be briefing your EU counterparts on the progress of the meeting, and how engaged were they in this meeting from afar?

SENIOR ADMINISTRATION OFFICIAL: Thank you, Valerie. Let me take those one at a time. And this is a little technical and can be easily confusing, so let me just try to disentangle two different things.

In the Assembly resolution, there were two separate paragraphs calling for action that related to market-based measures. One was for a so-called framework that really was intended to apply to things like a national or regional system – Australia, New Zealand, Japan – whoever decides to set up some kind of system – or for that matter it could have been the EU – and to outline parameters or guidelines about how those national or regional systems should work. That is not the area where you hear people talking about narrowing down the options. Okay, so that is one area. And there’s a lot of support in the meeting that we just had for pressing forward in the development of that so-called framework under paragraph 13.

Separately – different paragraph – paragraph 18 calls for an exploration of the feasibility of developing now not a national or regional market measure but a global one – a global cap and trade or a global offsetting mechanism. There has been an effort running through the ICAO Secretariat that started with – I think they had six options and then they had four options and they’re working on narrowing those options down.

It is my sense – although we don’t know for sure – but it is my sense that it is going to be a substantial period of time of working on what might be a global measure. And I don’t have any basis for projecting whether there will be any agreement to any of them by the time of the 2013 – the Fall of 2013, next Assembly. And again, the call in the 2010 Assembly was not to produce such a measure, but simply to explore the feasibility, do studies, consider all the factors, see whether you’ve – whether there’s any basis even for moving forward with respect to that global system. With respect to that national and regional ones, the so-called framework, there the call on the 2010 Assembly was different. It was develop the thing. So they’re really on different footings, and I can’t project at all the timing or even whether there will be an agreement with respect to the global system.

With regard to the EU, I have, in fact, called a colleague in the EU to let them know what – in a very broad sense what transpired in the meeting. And so we have kept them apprised that there was this meeting, and we told them that we would let them know what happened afterwards, and I did that. But other than that, they were not involved in the meeting.

MODERATOR: All right. Let’s take our next question.

OPERTOR: Our next question is from the line of Avery Fellow from BNA. Your line is open. Please go ahead.

QUESTION: Thanks for holding the call. Does the U.S. plan to file an Article 84 challenge under the Chicago Convention if these other measures do not cause the EU to set aside the ETS?

SENIOR ADMINISTRATION OFFICIAL: We haven’t made any decision about an Article 84 filing. I would say that we haven’t – we don’t have anything on or off the table, so to speak. Article 84 is not off the table, but we don’t have any immediate plans to do that, but it is always an option.

OPERATOR: Our next question comes from the line of Jo Biddle from AF and P. Please go ahead.

QUESTION: Thank you very much for holding this update on your talks. Am I understanding this right, that there are no other meetings planned now until the Assembly in the Fall of 2013? Or will you and the 16 other countries meet prior to that to try and map out any further strategy? And if that’s the case that you’re not meeting until the Fall of 2013, what happens when the EU starts sending its bills out in April of next year?

SENIOR ADMINISTRATION OFFICIAL: Thank you, Jo. So just a couple of things. The Assembly meeting is in the Fall of 2013. There are fairly regular meetings of the ICAO council, which I think is around 38 – something like that – 38 – 36, 38 countries. And those happen more frequently, I think on about every three or four months. I am not an – I don’t profess to be an expert in ICAO procedure, but I think that’s about right. And my understanding is that the next meeting of the council is in November of this year, so I believe there’s a November meeting of the ICAO council. So that’s not the 190 countries; that’s the 30-whatever it is – 36, 38 countries.

In terms of whether we are meeting again in this group or in any other grouping, we haven’t made any decision on that yet. I think it’s entirely possible, but we really – there isn’t any decision. We haven’t made any decision on those kinds of next steps.

OPERATOR: Our next question is the line of Lalit Jha from Press Trust of India. Your line is open. Please go ahead.

QUESTION: Hi. Thank you for doing this. I just wanted to check with you – is India among the 16 countries participating in the meeting?

SENIOR ADMINISTRATION OFFICIAL: Yes.

QUESTION: What was India’s point of view? Can you brief us on this?

SENIOR ADMINISTRATION OFFICIAL: Well, India was a participant. We conducted the meeting under what are often called Chatham House Rules, which is to say people are encouraged to speak freely and candidly because what they say isn’t going to be reported afterwards.

What I will say is that India has in the past, including in a meeting that they hosted, oh, must be more than a year ago now or a year – I forget the exact dates, but quite some time ago India hosted a meeting in Delhi, and they have been clear both in that meeting and any number of times thereafter that they are strongly opposed to the application of the ETS and have had quite strong and vigorous words concerning the application of the ETS to foreign carriers. So I think you can get a pretty good flavor of where India stands, looking at other things that they’ve said, but I’m not going to discuss what they said in this meeting.

OPERATOR: Our next question is from the line of Kathy Wolfe from Politico. Your line is open. Please go ahead.

QUESTION: Yes, thanks for taking my question. At the (inaudible), in your first – before the meeting, you had discussed how part of what you wanted to achieve was to start a discussion about whether there can be agreement on some alternative plan that would make the EU sort of put their plans at least in advance. And I didn’t see anything that would suggest such a thing in the information that was sent out prior to this call. So I just wanted to see if you could characterize those discussions or – I mean, that just didn’t go anywhere? Can you give us a little bit more information about how that went?

SENIOR ADMINISTRATION OFFICIAL: Thank you, Kathy. So what I would say is that – and then maybe I might be repeating myself a little bit, but I will try to get to your question. There was – the first point is that there was unanimous opposition to the ETS as applied to foreign carriers. And I don’t there was – again, it was – really wasn’t anybody who was – who had a different view on that. Some views were stronger than others, but they were all pretty strong.

We don’t know yet whether there is going to be a basis for finding a global solution that includes the EU. I mean, what I was struck by is that while there – while countries are opposed to having the ETS imposed upon them from outside, a whole lot of the measures that actually reduce emissions, countries are very not just open to but in varying different ways implementing.

So remember, a trading system by itself doesn’t cause aviation emissions to get reduced. It might cause airlines to go into the market and buy reductions, buy allowances from their governments if the governments are supplying them or from other businesses, but there are a whole lot of steps that airlines can take – more efficient airplanes and airplane engines, much better air traffic management operations, the development of alternative fuels. The U.S. is, I think, really a leader in all of those areas. We have almost certainly gone way past what the EU has done in the decade – the first decade of 2000-to-2010, where our emissions dropped by about 12 percent at the same time that our passenger traffic and freight went up by 15 percent.

So there’s a whole lot of concrete steps that are being taken. And again, I noted some of the specifics that are – that ICAO itself is quite involved in, including the development of a standard for aircraft, a C02 standard for aircraft, and various standards that are necessary to advance the ball on air traffic management. So all of those things are really quite central. And countries are quite willing to continue the conversation on market-based measures, particularly, I think, to advance the conversation on the so-called framework, which applies, again, to the national and regional side, but also to continue the conversation on – or the exploration on global MBM.

So across a range of all of the issues that one could plausibly and fairly look at that have to do with reducing emissions, countries are really quite open to having the discussion, and as I say in greater or lesser degrees depending on the countries, are acting. The only thing they don’t want to do is have the ETS imposed upon them.

So if you asked me, well, okay, so have we advanced the ball there for it, I would tell you I don't know yet. I mean, this was a – I think this was a quite, quite useful, quite constructive, quite candid conversation over two days. There will have to be some, in one form or another and I don't know what form it’ll – it’s going to take, but obviously there’s going to have to be some conversation down the road that includes the EU, whether it’s in a meeting or it’s offline or however that works. I don't know yet, but – so we don’t know, but it was a good conversation.

MODERATOR: All right, folks. I think that’s all the time we have for today. I appreciate you joining us for this call. Just a reminder this call was on background attributable to a Senior Administration Official. If you have any follow-up questions or comments, please contact us at the Press Office. Thanks so much.

SENIOR ADMINISTRATION OFFICIAL: Thank you.