Emissions trading in Europe coming in less than three years

 - March 27, 2009, 7:30 AM

Aircraft operators who will be subject to Europe’s new emissions trading scheme (ETS) beginning Jan. 1, 2012, need to start preparing now to be part of this complex process. Pre-compliance emissions monitoring will be conducted for flights starting in 2010 and 2011, and to be part of this, operators need to submit a monitoring plan by August  and have it approved by year-end.

All aircraft with an mtow of more than 5.7 metric tons (12,666 pounds) will be subject to the ETS, which applies to flights within European airspace as well as to and from it. A general exemption is available for flights operated entirely under visual flight rules.

Commercial operators can be exempt if they fly fewer than 243 flights in a four-month period over three consecutive four-month periods (equating to an average of no more than two flights per day). Alternatively, they can be exempt if their fleet generates fewer than 10,000 metric tons of carbon dioxide (CO2) each year. Neither of these exemptions is available to aircraft operated under private rules.

The pre-compliance emissions monitoring will measure each aircraft’s emissions in terms of metric tons of CO2 per kilometer flown. Operators do not have to take part in this benchmarking process starting in 2010, but unless they do so, they will not be entitled to any of the “free” ETS credits or allowances that will be issued on the basis of the measurements. The benchmarking data will be based on analysis of the passengers, baggage and freight carried, with flight distances calculated according to the Great Circle route plus 95 km (51 nm).

Under ETS, total emissions from aviation will be capped in 2012 at 97 percent of the total average levels from the 2004 to 2006 time frame; this limit will be reduced to 95 percent beginning in 2013. Operators needing more than their assigned allowance will have to purchase additional carbon credits (each allowing for an emission of one metric ton of CO2) on the open market.

According to data from Platts Emissions Daily, in late February the prices of carbon allowances traded on the futures market already used by industries other than aviation ranged from between €1 to €1.60 ($1.26 to $2) per metric ton of CO2 (for December 2009 delivery). These prices have fallen steadily since early November 2008 when they ranged from just under €16 to almost €20 ($20 to $25).

Credits may be bought from companies or individuals in industries other than aviation. ETS requirements can also be met by purchasing so-called clean development mechanism credits that pay for emissions-reduction projects in developing countries.

Under ETS, 85 percent of available carbon credits will be allocated free to operators, with 3 percent of the total number of credits held back to allow for new market entrants and operators who grow very fast. The remaining 15 percent of the credits available in 2012 will be auctioned off to operators between then and 2020, with proceeds supporting measures intended to address climate change within the EU. The business aviation lobby has complained that its operators will not have sufficient buying power to bid against major airlines in this auction process.

Aircraft Could Be Impounded

At the British Business and General Aviation Association (BBGA) conference at St. Albans on March 3, Philip Good, a policy officer with the European Commission’s environment directorate, explained that his department has drawn up a list assigning an initial 2,700 operators to one of the 27 European Union (EU) member states for the purposes of the ETS process. He warned that operators who fail to account for the emissions associated with their flights within Europe can be fined, blacklisted and ultimately have their aircraft impounded. Fines will be levied at a rate of ?100 ($126) per metric ton of CO2.

Operators within the EU are accountable to authorities in their own countries for complying with ETS. EASA has assigned non-European operators to one of the EU states and will expect them to deal with that state in meeting their ETS obligations. So, for example, many U.S. corporate flight departments have been assigned to the UK for ETS jurisdiction, as has the U.S. fleet of fractional ownership provider NetJets and Jet Aviation’s U.S.-based fleet.

Good said that operators not yet assigned to a European state for ETS compliance will nonetheless have to ensure that they comply. The European Commission will be able to trace all flights into European airspace through the Eurocontrol CFMU en route slot allocation system. This will also allow the EC to check that the number of credits spent corresponds accurately with the actual emissions associated with a given flight.

Operators also must have their emissions declarations for each year independently verified by an approved auditor. More detailed guidelines for compliance were agreed upon in late February but will not become law until June. These included simplified emissions-measurement procedures for smaller aircraft and the ability for “smaller emitters” flying fewer than 243 flights in a four-month period to use emissions modeling techniques rather than precise measurements.

The European Commission has agreed that operators from outside the EU can be exempt from the ETS if they are part of an equivalent emissions trading scheme in their own countries. So, for example, if President Barack Obama were to introduce an emissions-reduction program in the U.S., then the Europeans would honor this under reciprocity arrangements and would not make owners pay twice for their emissions.