NBAA Convention News

EBAA offers ETS alternative

 - October 1, 2008, 11:02 AM

The impact of the European Union’s plans to include aviation in its emission trading scheme (ETS)–a CO2 cap-and-trade system that has been in place since 2005 for ground-based facilities like coal-fired powerplants–is becoming clearer. The directive has yet to win approval, but a draft text adopted in July by the European Parliament already indicates that small operators will be exempt. Still, the European Business Aviation Association (EBAA) warns that complying with the plan will be impractical for most operators.

The annual CO2 allowance set by the EU is 10,000 metric tons, which translates into 3,170 metric tons of fuel burned per operator per year. An operator burning less fuel will remain outside the ETS, although it must still keep track of its fuel use.
According to EBAA CEO Eric Mandemaker, the threshold roughly corresponds to an operator with five midsize airplanes. Operators flying fewer than 243 flights per period for three consecutive four-month periods are also exempt. This frequency equates to an average of two flights a day. Aircraft weighing less than
5.7 metric tons (12,550 pounds) fall outside the ETS’ scope as well. The Cessna Citation CJ2+ light jet, for example, is just below the limit.

Exemptions also include those flights performed exclusively for the transport, on official mission, “of a reigning monarch and his immediate family, heads of state, heads of government and government ministers of an EU member state.”

The rest of business aviation operations will be included in the ETS starting in 2012. Current plans call for aircraft operators that year being required to cut their emissions by 3 percent, compared to their 2004-2006 average. They will receive 85 percent of their allowances for free, the rest being auctioned. All flights taking off or landing in the EU are included.

Emission permits will be allocated for a given trading period, expected to cover several years. Compliance reporting will be annual and should be independently verified. For those who do not comply, the ultimate sanction will be the revocation of their Air Operator’s Certificate.

EBAA sees the administration of the ETS as far too burdensome for many operators. The requested data already are being recorded–fuel weights, flight legs and passenger loads. The problem, according to EBAA, is collecting and putting these data together in the way the ETS requires. For example, each flight leg would need to be listed with numerous details.

EBAA had thus offered to form a pool of business jet operators to satisfy ETS requirements. This was a proposed alternative means of compliance, in an effort to keep the administrative cost acceptable. “But the Parliament rejected our proposal,” Mandemaker told NBAA Convention News.

Therefore, he said he sees business aviation being split into three categories, depending on the impact the ETS has on operators. The first category is comprised of those operators that remain entirely outside the scheme. With less than 10,000 metric tons of emissions, they would not be subject to obtaining CO2  credits. “But they are still subject to measuring, reporting and verification as far as we know at the current time,” Mandemaker said.

The second category, in his view, covers typical corporate flight departments. They will have to trade CO2 allowances. What irritates Mandemaker most is the fact that these administration costs “will be a multiple” of actual CO2 trading costs.

Finally, the third category is made up of larger operators flying regularly throughout Europe and other regions such as the Middle East, Asia and North America. They will have to factor in significant costs for CO2 credits. Despite all the rules the EU is devising, there is a risk of carbon leakage. “A European executive charter operator wanting to take customers from Dublin to New York and back may face U.S.
competition from outside the ETS,” Mandemaker noted. A U.S. operator could offer the same service without CO2 credit costs, as long as its flights to and from the EU stay below the 10,000-metric-ton annual threshold. Positioning flights may be used to carry other passengers. “All that money would go into the U.S.,” Mandemaker added.

The biggest downside of the plan, for him, is where the ETS’ auction money actually goes. “It should be used for research purposes, to make aircraft greener,” he said. However, all European Union bodies have made it clear they will attempt to CO2 emissions where it is cheaper to do so first. Unfortunately for the air transport industry, CO2 cuts are among the most costly.

The EU ETS currently caps annual emissions at an approximate two billion metric tons. It includes some 11,000 ground-based facilities. These emit about half of the EU’s CO2. One metric ton of CO2 trades at ?24 ($34). Some airlines, meanwhile, have started buying CO2 permits as a hedge against fuel prices.