The United States Securities and Exchange Commission (SEC) has proposed a new rule that would require airlines to disclose their greenhouse gas emissions. If this indeed happens, then airlines will be required to align their environmental targets already in the next two years. The proposal comes as part of a wider political push toward transparency when it comes to carbon emission reductions.

New reporting requirements?

The SEC, an independent regulatory agency in charge of securities markets in the US, has proposed that it wants to require all large publicly listed companies to disclose their carbon emissions, Airline Weekly reports.

The requirement that was tabled would also prompt all public companies to disclose any material risks that climate change poses to their financial condition.

Large companies with a valuation of more than $700 million would, under the proposal, be required to begin disclosing their emissions as early as 2024, while companies with a valuation that is lower than this would have until either 2025 or 2026 to do so.

The overarching purpose of these changes is to improve climate-risk transparency for investors.

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Airlines with a valuation above $700 million would have to comply by 2024 already. Photo: Getty Images

Airlines would be impacted

Out of all airlines in the USA that are publicly listed, all but two are classified as "large companies" by the valuation specification that holds $700 million as the cut-off point. Only Mesa Airlines and Sun Country Airlines do not meet the threshold. As such, if the new rule is adopted, these two would have until 2025 or 2026 to implement it.

Airlines for America (A4A) wrote to the SEC in June 2021 to ask that emissions disclosure standards be adopted incrementally and deliberately.

United Airlines is the only airline that includes carbon emissions in its annual financial filing to investors. In a report it published in 2021, the airline reported 15.5 million metric tons of gross carbon emissions in 2020.

Delta Air Lines and Alaska Airlines also disclosed their 2020 emissions but not through financial statements. Alaska reported 4.1 million metric tons of gross carbon emissions, and Delta reported 17.5 million.

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US carriers believed the COVID testing requirement unnecessarily restricted international travel. Photo: Getty Images

Why is this being proposed?

The push behind this proposed change to the regulation surrounding the reporting of carbon emissions is primarily a political one.

The idea is that when airlines have to report their carbon emissions to investors, then this disclosure requirement acts as an incentive for them to reduce the environmental impact of their operations.

The hope is that a decrease in carbon emissions would follow, driven by environmentally-minded investors who would obtain a clearer view of the action that airlines are taking to reduce their carbon footprint.

In that sense, this regulation is presented as a framework for the aviation industry to reduce the negative impact of flying on the environment through a market-based solution of supply and demand in the arena of capital markets.

What do you think of the proposed disclosure requirement for publicly listed airlines to report their carbon emissions by 2024? Let us know what you think of this story in the comments below.

Source: Airline Weekly