In his recent speech to Congress and in his subsequent budget proposal, President Obama indicated his intention to move forward immediately on a cap and trade system. One might think "Here we go again", as the topic has been unsuccessfully raised in previous sessions of congress. But two factors are different this time. First, we now have a President who ran for office stating that he would push for action on green house gas (GHG) emissions. Second, and probably most importantly, the budget depends heavily on funds raised by the sale of emission permits to achieve its fiscal goals. The budget plan is that these fees will bring in $80 billion in the first year of implementation (2012) and $645 billion in total between 2012 and 2019. Since the budget is built around the expectation of this "revenue" that the public feels will help the environment and our national security, it is hard to imagine that the enabling regulations will not become a reality. What other source of taxes could fill a hole this large? According to the Wall Street Journal (February 26, 2009), these fees will be the sixth largest source of federal income by 2019, exceeded only by corporate and individual income taxes, Social Security and Medicare taxes, and excise taxes. In other words, much of the "change" agenda that Obama was elected to pursue will be funded by the fees generated by a cap and trade system.

How might such a system impact GA? In past columns, we have pointed to California's AB32 legislation as an indication of how a cap and trade system might operate. However, because the California legislation excludes direct actions on air operations (due to the authorities granted to the FAA and the EPA), there is limited lessons we can learn from this example. Obviously, a federal cap and trade system would not suffer from this same lack of authority over aviation.

Regulation of GA emissions could take several forms. First, since larger businesses would have their own enterprise-wide "caps" (as is the case with AB32), it would be straightforward to include the fuels used in corporate flight departments within these individual caps. This would encourage flight departments to either fly less, procure more efficient planes, or purchase permits (or offsets, as allowed). Secondly, supporting regulations could require the phase-in of "low carbon fuels". These most likely would be fuels (equivalents of avgas and Jet A) that are wholly or in part derived from biomass sources. The low carbon fuel standard (LCFS) that is part of California's AB32 is one of key mechanisms to manage emissions from personal automobiles without imposing an unmanageable cap and trade system on individual car owners. This same mechanism could be created to deal with privately-owned planes at a national level. Suffice it to say that the science and even the definition of "low carbon fuels" are extremely complex and controversial. Nevertheless, governing regulations are rapidly evolving and being implemented in California. Because key legislators in both the House (Henry Waxman) and Senate (Barbara Boxer) and the Secretary of Energy (Steven Chu) are from California and have voiced agreement with California's approach, the adoption of the California-type polices and regulations at the national level could occur rapidly.