It appears that the Senate has postponed action for this year on the Lieberman-Warner bill to regulate GHG. While issues have been raised on numerous aspects of the bill, it would seem that that there is general agreement on its fundamental reliance on a "cap and trade" approach. Under such an approach, the covered entities would have a cap (either granted to them or purchased by them at a government auction) of permitted GHG emissions, with a right to buy and sell overages or shortfalls. The apparent acceptance of a cap and trade mechanism suggests that carbon offsets will play a key and continuing role in US regulation of GHG.

While it appears there will be no action on significant climate change legislation at the national level in the US in this election year, this does not mean that regulatory measures do not continue to move forward in this country. In particular, regulatory programs are rapidly evolving in California as that state continues to implement policies that will meet the extremely challenging requirements of its AB32 legislation, whose goals are a return to 1990 levels by 2020 and reduction to 20% of 1990 levels by 2050. To put these goals into perspective, California's GHG emissions are currently about 25% higher than those of 1990. California has just over 10 years to get back to the GHG levels of 20 years ago and with a larger population! And, it has already made many of the "easy" steps, as California has for many years had in place numerous energy conservation measures (e.g., building energy and appliance standards) that exceed federal standards.

What happens in California is an important leading indicator of what might happen in the rest of the US in the months and years ahead for several reasons:
·    Two regional associations of state governments, the Regional Greenhouse Gas Initiative (RGGI, composed of 10 northeastern and mid-Atlantic states and the Western Climate Initiative (WCI, composed of 7 western US states and 3 Canadian provinces) are strongly influenced by actions taken by California. For example, many of these states joined California in suing the US government to permit these states to set automotive fuel economy standards that are more strict than those set by the US government. We can probably expect these same states to continue pushing for more strict regulation of GHG even if the federal government takes action. This right of states to sent standards for GHG that are more strict than federal standards will be one of the key points of contention when the Lieberman Warner bill comes up for further discussion in 2009.
·    In the US Senate and House of Representatives, California representatives take an aggressive role in leading those bodies to follow the interests and desires of the state of California. For example, Senator Barbara Boxer is the "floor manager" of Lieberman-Warner, although her name is not commonly associated with that bill.

To date, GHG legislation that has been passed or proposed does not directly cover the smaller planes of general aviation. However, we can expect that if and when such legislation does evolve, it will be initiated in California. For example, the Air Resources Board (ARB) recently proposed legislation to regulate emissions from US and foreign-flagged ocean going ships that operate within 24 miles of the California coast. If California can regulate emissions from foreign-flagged ships does anyone think they cannot also regulate those from GA? An excellent view into developments in California can be found at the website of its Air Resources Board. This Newsletter will continue to track and report developments of this organization.

The past few weeks have seen intense discussions within the European Union of how an emissions trading system (ETS) should be designed to cover aviation. The ETS, which is basically a "cap and trade" program, would be the means through which the EU nations would meet their obligations under the Kyoto Protocol. While there are numerous details still under discussion, some general terms seem to be evolving:
·    the system would be in place no later than 2012
·    planes less than 12,500 lbs would be exempt
·    allowances would be a mix of allocations and auctions and would be reduced annually to meet Kyoto goals
·    the system would cover flights both within and to/from Europe.

Of course, aviation interests are strongly working to shape these policies to be the least damaging to their already stressed businesses. Some of the more contentious issues include:
·    Does the unilateral implementation of ETS by the EU conflict with other international laws regarding free movement of aircraft between countries?
·    How would the proceeds of allocation auctions be used? Would these funds be used for aviation improvements or simply be transferred into a general EU fund?
·    Would aviation be able to trade credits with non-aviation industries, which might be able to reduce emissions at lower cost? Or would a "closed" ETS require them to purchase credits from other aviation businesses (which would likely be more expensive)?

In recent weeks, Aviation Week magazine has begun to more fully cover how GHG issues might impact aviation. An example of one of their recent articles that is available on their public website can be found here.

The CAFE Foundation sponsored a symposium in late April on the topic of electric propulsion for aircraft. This group, whose name is based on Comparative Aircraft Flight Efficiency, has promoted numerous activities to better understand and promote improved fuel efficiency of general aviation aircraft. Most of the papers that were presented at the symposium can be downloaded at no cost from the Foundation's website. These papers show that there is a lot of creative energy investigating this propulsion option for general aviation aircraft. It would appear that for some segments of the GA market, such as where the aircraft might not be flown frequently, for long distances, or where large payloads are not critical (for example, the hobbyist and experimental segments), electric propulsion might provide a "low carbon" option to conventional propulsion systems that avoids the 100LL fuel issues. To facilitate the development of such electric propulsion systems, the EAA has asked the FAA for regulatory exemptions that would allow the use of electric motors in ultralight and light-sport aircraft.

The airline industry faces enormous challenges due to the double hit of higher fuel costs (due to high crude oil prices) and growing pressure to reduce green house gas emissions. A common response to these concerns is a push to increase engine and propulsion efficiency. Tens of millions (if not hundreds of millions) of dollars are being invested in new technologies such as geared-turbofan engines, open rotor engines, and new turbine core concepts. Over time, researchers expect these developments to result in efficiency improvements of at least 20%, and perhaps 30%, over current designs. For the GA world, all this research into turbine-based engines means there will tend to be a convergence in the fuel efficiency of turbine and piston engines, since it is unlikely that there will be corresponding research inventments made in the efficiency of spark-ignited piston engines. It would seem the longer-term future of GA engines will favor turbines, electric (see above), and Jet-A fueled diesels.