I want to tell you what happened over the weekend while no one was looking.
The U.S. Senate passed a bill early Saturday that gives the Administration unheard-of authority to ban U.S. companies from complying with another country’s law. (Photo credit: Flickr user WallyG)
At a few minutes before 2 a.m. on Saturday, just after the U.S. Senate wrapped up its wrangling over the latest funding resolution, a rather extraordinary bill was passed by the Senate.
If the bill is enacted, it would appear to be the first time in our nation's history that Congress has given sweeping authority to a cabinet member to prohibit U.S. companies from complying with the duly enacted law of another nation – and on top of that, to bail out firms that do comply or that get hit with penalties if they don't.
There are only a very few instances in America's recent history in which Congress has prohibited U.S. companies from complying with the laws of other nations. The purpose of those laws is to prevent U.S. firms from being used to implement policies of other nations that run counter to U.S. policy; they include the prohibitions on doing business in South Africa during the period of apartheid, and the anti-boycott laws, which prohibit U.S. firms from furthering boycotts of one country by another, and nowadays cover the Arab League boycott of Israel.
So, what action by a foreign nation was so odious that the Senate found it necessary to give a Cabinet secretary authority to prohibit U.S. firms from complying with it – and to bail U.S. firms out of any costs they might incur from it?
The bill that got through the Senate Saturday morning gives the Secretary of Transportation authority to prohibit U.S. airlines from complying with a European law requiring airplanes that land or take off from European airports to account for and limit their flights’ global warming pollution through an emissions trading system.
The bill also requires the Secretary of Transportation to hold the airlines "harmless" – meaning bail them out – of any costs, including both the costs of complying with the European law, estimated to be trivial, and the costs of not complying (the latter could be steep).
Aviation is already the world's seventh largest polluter, and if emissions from the industry are left unregulated, they're expected to quadruple by 2050.
With the passage of the Senate bill, the spotlight now zooms onto the Administration, in particular the Secretary of Transportation, and the talks at the International Civil Aviation Organization (ICAO) to reach a global agreement to limit aviation emissions — and to reach it quickly.
Below are some questions we have received on this bill, and my responses.
What is it in the European law that runs so counter to U.S. policy that it justifies this drastic action?
The airlines argue that the law violates U.S. sovereignty because the law holds airlines accountable for the entire pollution of the flights – even pollution occurring in the airspace over the sovereign territory of the United States.
But the fact that the European law applies to the entirety of the flight cannot be the reason it is counter to U.S. policy.
In fact, it's expressly the policy of the United States to apply our laws to a whole host of issues through the entirety of flights coming in and out of the U.S. – including portions of flights wholly over foreign sovereign territory. U.S. laws governing everything from security screening, to banning liquids and gels, to barring gambling apply to flights landing and taking off from U.S. airports, including the portions of the flights occurring in and over foreign lands.
Could the reason the European law is so counter to U.S. policy be that, as the U.S. airlines allege, it's a tax?
The law does require flights landing or taking off from European airports to hold sufficient pollution allowances to cover the amount of pollution coming out of the backs of their engines, and if they don't have enough allowances, they can buy them from European governments.
But it can't be that flight taxes per se are objectionable to the U.S. government. After all, Congress makes every traveler coming in and out of the United States pay a $16.70 international departure and arrival tax.
The aviation industry is world's seventh largest polluter. With the passage of the Senate bill, the spotlight now zooms onto the Administration, in particular the Secretary of Transportation, and the talks at the International Civil Aviation Organization (ICAO) to reach a global agreement to limit aviation emissions– and to reach it quickly.
And as courts have already found, the EU law isn't actually a tax: if the airlines don't want to, they don't have to send a cent to European government coffers. They can simply fly more efficiently. And if they don't want to do that, they can buy and sell pollution credits in the global marketplace without ever paying European governments a dime – and maybe even make money in the process.
In the run-up to the passage of the airline pollution bailout bill, a few changes were made that tell the Secretary of Transportation, if he does ban the airlines from complying with the European law, to reconsider his ban if the Europeans amend their law, or if an international agreement is reached to address this pollution, or if the U.S. adopts a regulation (which could take years).
The international agreement provision is the interesting part – it puts pressure on the International Civil Aviation Organization (ICAO) to amp up its action on climate change and agree on a global program at its next triennial Assembly in 2013.
But other parts of the bill – including those that bail the airlines out of any costs of complying – or not complying – with the law, remain.
Minor changes to the bill ensure that those costs won't be paid out of the airlines' taxpayer-funded trust fund, but taxpayers could still be on the hook if the airlines win a court judgment that the Secretary is required to hold them harmless, as the bill requires, so that the monies come from the taxpayer-funded Judgment Fund, a part of the U.S. Treasury used to satisfy court judgments against the United States.
What if the Secretary invokes his authority under a little-known airline competitiveness law that allows him to impose retaliatory penalties against airlines from countries that the Secretary finds are treating U.S. airlines “unreasonably”?
And what if the Secretary uses that authority to hold U.S. airlines harmless from the European law by dunning Lufthansa, British Airways, and other European airlines for the U.S. airlines’ compliance or non-compliance costs?
Those companies would likely protest in court. But if the Secretary's cost-dunning order were upheld, Europe could retaliate under its own airline competitiveness law and impose retaliatory fees on U.S. airlines.
Then you have a full-scale trade war. And since U.S. airlines have both code-share and revenue-share agreements with European carriers, a trade war on this issue amounts to shooting themselves in the wing.
What happens next?
A similar bill has already passed the House of Representatives, but because the bills have some differences, the House will have to take it up again when Congress reconvenes after the November elections.
Could it be that the part of the bill that's antithetical to U.S. policy is really the fact that the European law addresses climate change?
Maybe that's the case for the U.S. Congress at this sad juncture in our nation's history.
But is it also the case that the Obama Administration is so opposed to climate action that after 15 years of fruitless international efforts to curb aviation's global warming pollution, the Administration would stand in the way of other nations' efforts to address that pollution?
We don’t believe so. And if the bill passes, we and others will certainly be encouraging the Administration to find that it is in our public interest lies in striking a real deal in ICAO, rather than turning U.S. airlines into scofflaws at taxpayer – or the flying public’s – expense.