H. Rept. 112-232 - 112th Congress (2011-2012)
October 05, 2011, As Reported by the Transportation and Infrastructure Committee

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House Report 112-232 - EUROPEAN UNION EMISSIONS TRADING SCHEME PROHIBITION ACT OF 2011




[House Report 112-232]
[From the U.S. Government Printing Office]


112th Congress                                            Rept. 112-232
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
    EUROPEAN UNION EMISSIONS TRADING SCHEME PROHIBITION ACT OF 2011

                                _______
                                

October 5, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Mica, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2594]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 2594) to prohibit operators of 
civil aircraft of the United States from participating in the 
European Union's emissions trading scheme, and for other 
purposes, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose of the Legislation and Summary...........................     2
Background and Need for the Legislation..........................     2
Legislative History..............................................     7
Hearings.........................................................     7
Committee Votes..................................................     8
Committee Oversight Findings.....................................     8
Cost of Legislation..............................................     8
New Budget Authority and Tax Expenditures........................     8
Congressional Budget Office Cost Estimate........................     8
Performance Goals and Objectives.................................     9
Advisory of Earmarks.............................................    10
Federal Mandates Statement.......................................    10
Preemption Clarification.........................................    10
Advisory Committee Statement.....................................    10
Applicability to the Legislative Branch..........................    10
Section-by-Section Analysis of the Legislation...................    10
Changes in Existing Law Made by the Bill, as Reported............    11

                 PURPOSE OF THE LEGISLATION AND SUMMARY

    H.R. 2594, the European Union Emissions Trading Scheme 
Prohibition Act of 2011, reports key findings of the Congress 
regarding the European Union's Emissions Trading Scheme (EU 
ETS), which will be imposed unilaterally without the consensus 
of the United States and other members at the International 
Civil Aviation Organization (ICAO). The bill also directs the 
Secretary of Transportation to prohibit U.S. aircraft operators 
from participating in the ETS. Finally, the bill instructs U.S. 
officials to negotiate or take any action necessary to ensure 
U.S. aviation operators are not penalized by any unilaterally 
imposed EU scheme.

                BACKGROUND AND NEED FOR THE LEGISLATION

European Union's Emissions Trading Scheme

    The European Union's Emissions Trading Scheme (EU ETS) 
began in 2005 with the capping of emissions of carbon dioxide 
(CO
2
) from more than 10,000 stationary sources 
within the EU (covered sectors include: power plants; petroleum 
refining; iron and steel production; coke ovens; pulp and 
paper; and cement, glass, lime, brick, and ceramics 
production).\1\ Under the ETS, the EU auctions a specified 
number of emissions allowances for each multi-year period, and 
distributes a certain number of allowances for free. A covered 
emitter is required to submit to regulatory authorities one 
allowance for each ton of CO
2
 emitted during the 
period. There is an active market for allowance trading, in 
which the emitter may sell unneeded allowances to others or 
purchase whatever additional allowances it requires.\2\
---------------------------------------------------------------------------
    \1\CRS Report RL34150, Climate Change and the EU Emissions Trading 
Scheme (ETS): Kyoto and Beyond, by Larry Parker (February 2008).
    \2\CRS Report European Aviation Policy Issues, by Bart Elias (June 
2011).
---------------------------------------------------------------------------
    Starting in January 2012, civil aviation operators landing 
in or departing from the EU will be included in the ETS.\3\ 
This means that all segments of international flights to, 
within, and from the EU by U.S. air carriers would be subject 
to the ETS, including those portions over the United States, 
Canada, and international waters.
---------------------------------------------------------------------------
    \3\ETS provides an exception for military aircraft, some small 
carriers, emergency services, research, and humanitarian flights.
---------------------------------------------------------------------------
    In 2012, the total quantity of emissions allowances would 
be equivalent to 97% of the aviation sector's average 2004-2006 
emissions. In allocating the emissions allowed under the cap, 
85% of the sector's 2012 allowances are to be given to aircraft 
operators at no cost, and 15% of the allowances are auctioned. 
In 2012, according to the International Air Transport 
Association (IATA), 212.9 million credits will be issued 
directly to airlines, 85%, or 181 million, for free, and 15% or 
31.9 million will have to be purchased through auction. IATA 
also indicates that in 2012, airlines will have to purchase an 
additional 35.5 million allowances in the open market, assuming 
they are available, to cover growth. With the price of carbon 
in the EU currently = 11,\4\ the total cost to airlines in 2012 
is estimated to be about $1 billion. The 2012 price of carbon 
in the EU is depressed due to the current economic crisis and 
is expected to rise. By 2020, the price is anticipated to reach 
= 50.
---------------------------------------------------------------------------
    \4\= = Euros.
---------------------------------------------------------------------------
    In 2013, the cap would be reduced to 95% of the aviation 
sector's average 2004-2006 emissions, with further reductions 
to be agreed on as part of the ongoing review of the ETS. The 
EU Commission has proposed that 80% of the aviation sector's 
allowances be distributed free of charge in 2013, with 20% 
being auctioned. The percentage of free allowances is expected 
to continue declining with a goal of auctioning all allowances 
in 2020. According to IATA, the cost estimate for the EU ETS 
goes up to $3.5 billion in 2020.
    Operators emitting more than their allowed cap would need 
to buy additional allowances on the carbon market and the 
directive provides sanctions for failure to comply with the 
scheme. Sanctions include the possibility that a non-complying 
airline might be banned from operating in the EU.\5\ Airlines 
will purchase allowances and pay penalties to the EU Member 
State to which they most frequently fly; the United Kingdom 
will be the Member State for most U.S. carriers.
---------------------------------------------------------------------------
    \5\CRS Report European Aviation Policy Issues, by Bart Elias (June 
2011).
---------------------------------------------------------------------------
    Finally, under the EU ETS, if a country can show 
``equivalent measures'' on CO
2
 reduction from civil 
aviation, then airlines operating between the EU and that 
country would not have to pay the carbon charge for one leg of 
their European roundtrip. However, the EU has provided no 
guidance on how to establish ``equivalence'' or what 
``equivalent measures'' means.

U.S. Government position on ETS

    According to the Department of Transportation (DOT), the 
Department of State, and the Federal Aviation Administration 
(FAA), the U.S. is committed to addressing global climate 
change and believes that the International Civil Aviation 
Organization (ICAO) policies, standards and recommended 
practices should provide the framework for measures to address 
international Greenhouse Gas (GHG) emissions from international 
civil aviation. The U.S. Government (USG) has made clear to its 
European counterparts, that it is the USG's responsibility and 
authority to determine the U.S. response to climate change. 
Currently, the USG is developing its response to climate change 
in conjunction with work being done in ICAO.
    In June 2011, the United States presented its formal 
objection to the EU ETS at a half-yearly meeting in Oslo of the 
U.S.-EU Joint Committee created under the 2007 Air Transport 
Agreement on the liberalization of air service between the 
United States and Europe (commonly known as the ``Open Skies 
agreement''), and which meets regularly for discussions on 
implementation of the agreement. The Open Skies agreement 
liberalized air service between the United States and Europe 
by, among other things, permitting U.S. and European air 
carriers to fly between any point in the European Union and any 
point in the United States.
    USG objects to U.S. operators being subject to the EU ETS 
without the explicit agreement of the USG for any portion of 
their flights between airports of Member States of the EU and 
the U.S., as well as for other flights covered by the U.S.-EU 
Air Transport Agreement. This includes all preliminary 
impositions on U.S. operators such as monitoring, reporting and 
verification of emissions, not just surrendering of permits for 
such emissions.
    According to the FAA, in response to a recent ICAO Assembly 
resolution with respect to aviation and climate change 
challenges, the USG is undertaking a set of initiatives under 
the U.S. Next Generation Air Transportation System (NextGen), 
as well as working at ICAO on such initiatives as the 
development of a meaningful CO
2
 standard. According 
to FAA, the full implementation of NextGen could reduce 
greenhouse gas emissions from aircraft by up to 12 percent by 
2025.\6\ The USG also points out that the U.S. aviation sector 
has a strong record of fuel efficiency improvements and 
greenhouse gas emissions savings and continues to work with the 
government to advance technological, operational, 
infrastructure and alternative fuel opportunities for further 
improvements.
---------------------------------------------------------------------------
    \6\GAO report number GAO-08-706T, ``Aviation And The Environment: 
NextGen and Research and Development Are Keys to Reducing Emissions and 
Their Impact on Health and Climate'' (May 7, 2008).
---------------------------------------------------------------------------
    Based on system wide operations (both domestic and 
international) U.S. aviation fuel consumption and 
CO
2
 emissions have declined 15% between 2000 and 
2010.\7\ By comparison, based upon European greenhouse gas 
inventories submitted to the United Nations, the annual 
aviation CO
2
 emissions for operations within the 27 
European Union Member States were 12% lower in 2009 compared to 
2000, while CO
2
 emissions for flights departing the 
27 European Union Member States grew by 15%.\8\
---------------------------------------------------------------------------
    \7\U.S. aviation emissions statistics for 2000 through 2010 were 
generated from FAA modeled data using the Aviation Environmental Design 
Tool (AEDT).
    \8\The European Environment Agency (EEA) submits greenhouse gas 
inventories to the United Nations in accordance with the Framework 
Convention on Climate Change (UNFCCC). The EU27 aviation statistics are 
from EEA. (see: http://dataservice.eea.europa.eu/pivotapp/
pivot.aspx?pivotid=475).
---------------------------------------------------------------------------

Global opposition to the EU ETS

    Representatives of Argentina, Brazil, Chile, China, 
Colombia, Cuba, Egypt, India, Japan, Republic of Korea, 
Malaysia, Mexico, Nigeria, Paraguay, Qatar, Russian Federation, 
Saudi Arabia, Singapore, South Africa, the United States of 
America and the United Arab Emirates met in New Delhi, India 
and on September 30, 2011, adopted a Joint Declaration with the 
following declarations included:
          1. Call on ICAO to continue to undertake efforts to 
        reduce aviation's contribution to climate change;
          2. Intend to collaborate in support of operational 
        changes and improvements to air traffic management and 
        airport systems, which will tend to reduce emissions of 
        the aviation sector;
          3. Intend to accelerate the development and 
        implementation of low-carbon aircraft technologies and 
        sustainable alternative fuels, and sharing of best 
        practice;
          4. Support ICAO efforts to develop a meaningful 
        aircraft CO
2
 standard aiming for 2013;
          5. Oppose the EU's plan to include all flights by 
        non-EU carriers to/from an airport in the territory of 
        an EU Member State in its emissions trading system (EU 
        Directive 2008/10/101/EC), which is inconsistent with 
        applicable international law;
          6. Urge the EU and its Member States to refrain from 
        including flights by non-EU carriers to/from an airport 
        in the territory of an EU Member State in its emissions 
        trading system;
          7. Urge the EU and its Member States to work 
        collaboratively with the rest of the international 
        community to address aviation emissions;
          8. Intend to continue to work together to oppose the 
        imposition of the EU ETS on our operators;
          9. Invite any other State to associate itself with 
        this declaration.

Industry lawsuit

    In 2009, American, United, and Continental airlines, along 
with the Air Transport Association of America, filed a legal 
challenge to the EU ETS in the United Kingdom. The lawsuit was 
transferred to the European Court of Justice and arguments in 
the case began on July 5, 2011.
    The U.S. airline industry has requested that the European 
Court of Justice (ECJ) dismiss the European Union's application 
of an ETS on international civil aviation. The U.S. air 
carriers argue that aviation greenhouse gas emissions should be 
regulated on a global sectoral basis (i.e. only civil aviation 
sector of industry), and that the EU's unilateral action to 
regulate emissions of countries violates international law. It 
is the air carriers' position that the EU is violating 
international law and several treaty provisions in the Chicago 
Convention. Pursuant to the Chicago Convention, countries have 
authority over airlines in their own airspace. Therefore, the 
air carriers argue that the EU ETS cannot regulate flights to 
and from Europe when they are not over Europe. The U.S. air 
carriers also dispute whether Europe can, under the Chicago 
Convention, regulate U.S. airlines as they fly over the high 
seas, or if Europe can levy charges on other country's 
airlines. Finally, air carriers argue that the levies imposed 
by the ETS violate the Kyoto Protocol which confirms that ICAO 
has the authority to establish greenhouse gas policy for 
international aviation.\9\
---------------------------------------------------------------------------
    \9\``ATA Calls EU ETS Application to U.S. Airlines Illegal,'' 
http://www.airlines.org/News/Releases/Pages/news_07-05-11.aspx (July 5, 
2011).
---------------------------------------------------------------------------
    In its argument before the ECJ, the ATA provided an example 
of the application of the EU ETS to a flight from San Francisco 
to London Heathrow. According to ATA, as a percentage of total 
emissions from this flight, 29% take place in US airspace, 
including those on the ground at the airport. Another 37% take 
place in Canadian airspace and a further 25% take place over 
the high seas. Only 9% of emissions take place in EU airspace 
(Attachment A provides a visual of this flight). But, the ATA 
pointed out that the ETS will impose a levy on the air carrier, 
and may also impose an excess emissions penalty, based on 
emissions for the entire flight from gate-to-gate.
    The EU is defending its ETS and its interpretation of 
international law. The European Court of Justice is expected to 
rule at the end of 2011 or in early 2012.

EU position on ETS

    The EU indicates that it is leading global efforts to 
reduce greenhouse gas emissions from human activities and the 
ETS is the cornerstone of its strategy for cutting its own 
greenhouse gas emissions cost-effectively.\10\ The European 
Commission believes using emissions trading to tackle emissions 
from the aviation sector is fully in line with the EU's 
international obligations and decisions taken by ICAO.\11\ The 
European Commission created the Directorate-General for Climate 
Action (``DG CLIMA'') in February 2010. DG CLIMA leads 
international negotiations on climate, helps the EU to deal 
with the consequences of climate change and to meet its targets 
for 2020, and develops and implements the EU ETS.\12\ The 
European Commission would like to build a global carbon market 
and hopes to link up the ETS with compatible systems around the 
world to form the backbone of such a carbon market.\13\
---------------------------------------------------------------------------
    \10\EU action against climate change. The EU Emissions Trading 
Scheme, European Commission (2009 edition).
    \11\Id.
    \12\European Commission Climate Action website, http://
ec.europa.eu/clima/policies/ets/index_en.htm (November 2010).
    \13\Id.
---------------------------------------------------------------------------
    The European Commission has estimated that auctioning could 
raise an EU-wide total of = 30-50 billion depending on the 
carbon price.\14\ EU Member States have agreed that they should 
use at least 50% of this income to combat climate change, in 
both Europe and developing countries.\15\
---------------------------------------------------------------------------
    \14\EU action against climate change. The EU Emissions Trading 
Scheme, European Commission (2009 edition).
    \15\Id.
---------------------------------------------------------------------------

ICAO actions on climate change

    Over the past few years, the international aviation 
community has agreed to the following measures to address the 
challenge of climate change through ICAO:16}17
---------------------------------------------------------------------------
    \16\Source: Federal Aviation Administration.
    \17\With the exception of efforts to address fuel burn reporting, 
these are aspirational, non-binding measures.
---------------------------------------------------------------------------
    
 A global goal of 2 percent annual improvement in 
fuel efficiency through 2050, and further exploration of the 
feasibility of more ambitious medium and long-term goals, 
including carbon-neutral growth and emissions reductions.
    
 The development of a global CO
2
 
standard for aircraft and facilitation of further operational 
changes to reduce aviation emissions.
    
 The development of a framework for market-based 
measures in international aviation.
    
 Elaboration on measures to assist developing 
States and to facilitate access to financial resources, 
technology transfer and capacity building.
    
 The submission of States' action plans, outlining 
their policies and actions, and annual reporting of data to 
ICAO on their aviation fuel consumption. ICAO is currently 
undertaking work in both these areas to assist ICAO Member 
States in fulfilling these requirements. This is the first case 
where a global industry has adopted mandatory emissions 
reporting requirements across both Annex-1 and non-Annex 1 
countries.\18\
---------------------------------------------------------------------------
    \18\Annex I countries are industrialized countries and economies in 
transition; Annex II countries are developed countries which pay for 
costs of developing countries; and Non Annex I countries are developing 
countries.
---------------------------------------------------------------------------

Development of legislation

    Starting January 2012, the EU will begin unilateral 
imposition of its Emissions Trading Scheme (ETS) on aviation 
operators landing in or departing from the EU. The ETS will 
apply to the entire flight--including those parts outside the 
EU Member States' airspace including over the U.S., and Canada 
and international waters. U.S. airlines and operators will be 
required to pay an emissions tax to the EU Member State to 
which they most frequently fly. There is no requirement that 
this revenue go to research and development.
    Measures to address the contribution of civil aviation to 
climate change must be developed through international 
consensus and agreement. The unilateral imposition of the ETS 
is a clear violation of international law. In addition, the ETS 
lacks any transparency and clarity--there is no guidance on how 
the EU will apply the ETS to international air carriers. Given 
the lack of transparency, there are legitimate concerns as to 
whether the ETS will be evenly applied to all international air 
carriers. The EU could put U.S. air carriers at a competitive 
disadvantage, resulting in job losses in the U.S. aviation 
industry. The U.S., China, Australia, Canada, India, and 
numerous other countries have objected to the application of 
ETS to their air carriers. Therefore, the bipartisan leadership 
of the Committee on Transportation and Infrastructure, in 
consultation with Executive Branch officials, developed and 
introduced H.R. 2594 which directs the Secretary of 
Transportation to prohibit U.S. aircraft operators from 
participating in the EU's Emissions Trading Scheme and directs 
the Secretary of Transportation, the FAA Administrator, and 
other appropriate officials of the United States Government to 
use all authority and tools at their disposal in negotiations 
with the European Union to hold U.S. interests harmless from 
the scheme. The bipartisan leadership of the Committee is in 
agreement that instead of unilaterally imposing a controversial 
measure upon U.S. and global airlines, the EU should work with 
its international partners in ICAO to develop a consensual 
approach to addressing aviation emissions.

                          LEGISLATIVE HISTORY

    On July 20, 2011, Full Committee Chairman John L. Mica 
introduced H.R. 2594, European Union Emissions Trading Scheme 
Prohibition Act of 2011. On September 8, 2011, the Committee on 
Transportation and Infrastructure met in open session to 
consider H.R. 2594, and ordered the bill reported favorably, 
without amendment, to the House by voice vote with a quorum 
present.

                                HEARINGS

    On July 27, 2011, the Subcommittee on Aviation held a 
hearing to discuss the impacts of the European Union's 
Emissions Trading Scheme on U.S. interests and to discuss the 
diplomatic response of the United States Government. The 
hearing focused on the unilateral actions of the EU in its 
application of the ETS to all civil aviation operations; the 
EU's actions and international law; and the impact of the EU's 
ETS on U.S. operators, the competitiveness of the U.S. aviation 
industry, and U.S. aviation jobs. Senior officials from the DOT 
and the Department of State participated in the hearing. In 
addition, representatives from both airline and labor sectors 
of the aviation industry participated in the hearing.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each record vote on a motion to 
report and on any amendment offered to the measure or matter, 
and the names of those members voting for and against. During 
consideration of H.R. 2594, no recorded votes were taken. The 
bill was reported to the House with a favorable recommendation 
after a voice vote.

                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on Transportation and 
Infrastructure's oversight findings and recommendations are 
reflected in this report.

                          COST OF LEGISLATION

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

               NEW BUDGET AUTHORITY AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974, included below.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    With respect to the requirement of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
402 of the Congressional Budget Act of 1974, the Committee has 
received the following cost estimate for H.R. 2594 from the 
Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 23, 2011.
Hon. John L. Mica,
Chairman, Committee on Transportation and Infrastructure,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2594, the European 
Union Emissions Trading Scheme Prohibition Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Megan 
Carroll.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2594--European Union Emissions Trading Scheme Prohibition Act of 
        2011

    The European Union (EU) has established the European Union 
Emissions Trading Scheme (ETS), a regulatory framework related 
to greenhouse gas emissions. Starting in 2012, the ETS will 
cover emissions from air carriers that operate flights within, 
to, and from EU member states. H.R. 2594 would direct the 
Secretary of Transportation to prohibit U.S. air carriers from 
participating in the ETS if it is unilaterally imposed on those 
air carriers by the EU. The bill would direct federal agencies 
to conduct negotiations and take other actions necessary to 
ensure that U.S. air carriers are not adversely affected by the 
ETS. The outcome of any negotiations between the U.S. 
government and the EU and the effect of those negotiations on 
U.S. air carriers are unclear.
    CBO estimates that enacting H.R. 2594 would have no 
significant impact on the federal budget. We expect that the 
bill would not alter the scope of diplomatic efforts currently 
underway or federal agencies' costs to participate in those 
efforts, which are subject to appropriation. The bill would not 
affect direct spending or revenues so pay-as-you-go procedures 
do not apply.
    H.R. 2594 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA). H.R. 2594 would 
impose a private-sector mandate, as defined in UMRA, if U.S. 
air carriers would be prohibited from participating in the ETS. 
The cost of the mandate would depend on how the prohibition is 
administered by the Department of Transportation. Because 
information about how the prohibition would be implemented is 
not available, CBO has no basis for estimating the cost, if 
any, to U.S. air carriers. Consequently, CBO cannot determine 
whether the cost of the mandate would exceed the annual 
threshold established in UMRA for private-sector mandates ($142 
million in 2011, adjusted annually for inflation).
    The CBO staff contacts for this estimate are Megan Carroll 
(for federal costs) and Amy Petz (for the impact on the private 
sector). The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                    PERFORMANCE GOALS AND OBJECTIVES

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
prohibit U.S. operators' participation in the ill-advised and 
illegal European Union Emissions Trading Scheme. The 
legislation also directs the U.S. Government to use all tools 
at its disposal in negotiations with the European Union to hold 
U.S. interests harmless from the scheme.

                          ADVISORY OF EARMARKS

    In compliance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2594 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        PREEMPTION CLARIFICATION

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee states that H.R. 2594 does not 
preempt any state, local, or tribal law.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                APPLICABILITY TO THE LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 of the bill designates the title of the bill as 
the ``European Union Emissions Trading Scheme Prohibition Act 
of 2011''.

Section 2. Findings

    Section 2 relates the following findings of Congress:
    (1) The European Union has unilaterally imposed an 
emissions trading scheme (in this section referred to as the 
``ETS'') on non-European Union aircraft flying to and from, as 
well as within, Europe.
    (2) United States airlines and other United States aircraft 
operators will be required under the ETS to pay for European 
Union emissions allowances for aircraft operations within the 
United States, over other non-European Union countries, and in 
international airspace for flights serving the European Union.
    (3) The European Union's extraterritorial action is 
inconsistent with long-established international law and 
practice, including the Chicago Convention of 1944 and the Air 
Transport Agreement between the United States and the European 
Union and its member states, and directly infringes on the 
sovereignty of the United States.
    (4) The European Union's action undermines ongoing efforts 
at the International Civil Aviation Organization to develop a 
unified, worldwide approach to reducing aircraft greenhouse gas 
emissions and has generated unnecessary friction within the 
international civil aviation community as it endeavors to 
reduce such emissions.
    (5) The European Union and its member states should instead 
work with other contracting states of the International Civil 
Aviation Organization to develop such an approach.
    (6) There is no assurance that ETS revenues will be used 
for aviation environmental purposes by the European Union 
member states that will collect them.
    (7) The United States Government expressed these and other 
serious objections relating to the ETS to representatives of 
the European Union and its member states during June 2011, but 
has not received satisfactory answers to those objections.

Section 3. Prohibition on participation in the European Union's 
        emissions trading scheme

    Section 3 of the bill directs the Secretary of 
Transportation to prohibit an operator of a civil aircraft of 
the United States from participating in any emissions trading 
scheme unilaterally established by the European Union.

Section 4. Negotiations

    Section 4 of the bill directs the Secretary, the FAA 
Administrator, and other appropriate officials of the United 
States Government to use all authority and tools at their 
disposal in negotiations with the European Union to hold U.S. 
interests harmless from any emissions trading scheme 
unilaterally established by the EU.

Section 5. Civil aircraft of the United States defined

    Section 5 of the bill defines terms used within the 
legislation.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 2594 makes no changes in existing law.