A new rule proposed by the U.S. Securities and Exchange Commission (SEC) would require airlines to disclose actual greenhouse-gas emissions in as little as two years. The move would bring an end to the industry’s vague approach to carbon emission reduction targets.
Under the guise of improved climate-risk transparency for investors, the financial regulator would require large publicly listed companies to disclose carbon emissions and any material risks climate change poses to their “business, results of operations, or financial condition.” Large companies with public valuations of more than $700 million would have to begin disclosing emissions in 2024, while smaller companies would have until 2025 or 2026 to do so.
Nearly every U.S. airline is classified as a large company — or “large accelerated filer” in SEC parlance — and would need to begin disclosures in two years. Only two publicly traded carriers, Mesa Airlines and Sun Country Airlines, are classified as smaller companies and would have more time to implement the new rule.
Airlines for America (A4A), in a letter to the SEC in June 2021 that was released publicly on March 21, said it would “welcome” new emissions disclosure standards in order to “reduce the proliferation of ‘bespoke’ disclosure requests from investors.” The trade group called for a “deliberate, incremental approach” to implementing such rules.
An A4A spokesperson declined to comment further on the proposed rule.
The disclosure requirements would be a big change from how airlines have offered up their climate bona fides to date. The U.S. industry has committed to net-zero emissions by 2050 with each airline touting different methods to achieve this goal. These range from buying new, more fuel-efficient jets to sustainable aviation fuel commitments and investing in electric and hydrogen propulsion technology. But, for the most part, each commitment has only come with emissions reduction percentages and not concrete numbers that an airline can be held to.
Several U.S. airlines report carbon emissions, though only one — United Airlines — includes them in its annual financial filing to investors. Chicago-based United reported 15.5 million metric tons of gross emissions in 2020 in its 2021 annual report. Alaska Airlines and Delta Air Lines both disclosed their 2020 emissions of 4.1 million and 17.5 million metric tons, respectively, in separate sustainability reports. All three airlines reported significant emissions reductions from the year before owing to the precipitous drop in flying due to the Covid-19 pandemic.
Robert Rivkin, chief counsel at United, said in a comment to the SEC in June 2021 that the airline supported “consistent and comparable data” on emissions across companies. This would “harmonize the overlapping reporting frameworks, and enhance certainty and clarity” for investors.
And in a separate June 2021 letter, Delta Chief Counsel Peter Carter said the carrier also supported a standard disclosure framework that replaced the currently “fragmented” approach used by companies currently.
The proposed rule comes as President Joseph Biden pushes for action on climate change. In March 2021, FAA Administrator Steve Dickson said the area was a “huge priority” for the administration, and added that sustainable aviation fuels would be a “big part of that.” The disclosure requirement could encourage companies, including airlines, to do more on reducing emissions once investors have a clear view of what is — and is not — being done.
“It’s likely this could galvanize a race to lower emissions within the industry to both please shareholders and passengers alike,” said James Dent, head of environmental, social, and governance (ESG) and sustainability at TravelPerk. That “would be beneficial for the wider world.”