EBACE Convention News

Humphries says ETS would burden smaller operators

 - May 6, 2009, 6:29 AM

Europe’s emission trading scheme (ETS) takes effect in 2012, but operators need to have an approved monitoring plan by the end of this year to participate in pre-compliance monitoring in 2010 and 2011. EBACE Convention News asked EBAA president and CEO Brian Humphries about how the new rules will affect European operators:

Are the authorities willing to reduce or at least delay the cost of new regulations and requirements such as security and emissions trading in response to today’s difficult business conditions?
No, they are not and this is very worrisome. Let me give you an example. Recently we were speaking to an official at the European Commission about the emissions trading scheme [ETS] and we said that the monitoring, reporting and verification [MRV] system for this would probably cost a small operator about £40,000. The official said, “Well that’s not very much, is it?” He completely failed to appreciate that at today’s interest rates, £40,000 a year amounts to a loan of about £800,000, assuming you can get such a loan.

They absolutely do not appreciate the realities of this business and the fact that many of these operators have very small profit margins despite the fact that they seem to have expensive-looking equipment like jets and helicopters. A lot of them don’t own the equipment, they just operate them. To suddenly add a cost like £40,000 per year just to handle emissions trading and another £20,000 a year for the increased CAA oversight charges, plus security cost increases, just shows a complete lack of awareness and sensitivity of our business to cost.

The requirement to control emissions has been developed over a long period but it is arriving just at a time when the overall level of emissions from aviation is actually falling due to difficult market conditions. The airlines are making the same point. There needs to be much more sensitivity to the proportionality of regulation.

There have been some positive developments, though. One came from the work that we did with the Commission that led to the paper in January 2008 on the sustainable future for business aviation. Then more recently that was taken up by the European Parliament,which resulted in the Queiro report at the end of 2008. This was very good. It went back to the Commission and challenged them. It said: “Not only is business aviation an important sector deserving adequate access to airports and secondary airports, but regulations must be proportionate and they must be affordable. Tell us how you are going to do that.”

So at a senior level we do have recognition that business aviation is important to the European economy and that there is a need not to strangle it with disproportionate rules and bureaucracy. However, at a working level that understanding just doesn’t seem to be there. I have seen no sign at all that organizations like the CAA, EASA or the Commission recognize the need to help an industry struggling in difficult times.

One of the things that we have stressed repeatedly is that it is official European policy to treat small and medium-sized enterprises generously and not strangle them with bureaucracy. They have done a lot of things for other small- and medium-sized companies but it doesn’t seem to have filtered down to our sector. We are pushing this point hard on emissions trading, EASA regulations and security.

Many business aircraft operators have to start preparing to join the emissions trading scheme [ETS]. How satisfied are you with the final ruling on ETS and how it will apply to business aviation? How much of a burden will this be? What steps is EBAA taking to support its members in this respect?
We have partially avoided the worst excesses of this law in terms of commercial operations but we have a terrible result in terms of corporate operations. This has nothing to do with the environment, and everything to do with the approach of government to perceived high-net-worth individuals.

What we have now is a reasonable threshold in that commercial operators emitting less than 10,000 metric tons of carbon dioxide (CO2)–which is probably equivalent to a fleet of about six Hawker 800s–or flying less than 243 flights in a four-month period will not have to do emissions trading. That is a good result. But the bad result is that any corporate operator– no matter how little he operates in Europe– will have to trade every ton he produces.

When we went to a meeting of the UK authorities on ETS in November, they thought they would have to monitor only 30 airlines. At another meeting in February they admitted that they will actually have to monitor more than 700 operators and this will be hard for them.

Everybody now realizes what a huge chunk they have bitten off that they are going to have to oversee and manage. There is a will on all sides to try to develop a simplified procedure for monitoring, recording and verification.

At the same time, Entec [environmental consultants to the EC] have published a document with the most absurdly complex procedures based on issues such as the specific gravity and calorific value of the fuel. The document addresses the free allowance in terms of ton/kilometers of CO2, which, to be honest, isn’t very relevant for our operators because they carry small numbers of passengers, and also emissions, which is an incredibly complex calculation that is completely disproportionate for everyone but the biggest airline operators. [Most business aviation operators will probably get only about 5 percent of their emissions covered by free allowances and so probably won’t bother to apply for them.–Ed.]

We have been working with Eurocontrol to develop the Pagoda model as a simplified means to assess emissions for business aircraft. The Commission has indicated that this could be accepted for any operator emitting less than 10,000 tons. It is very promising, but the model has not yet been verified. But indications are that it is very accurate, to within two or three percent.

It takes hours flown and uses a methodology to calculate emissions for a particular operator and so calculates the CO2 emitted for any flight. They could tell you how much CO2 you have emitted each year based on the Eurocontrol charges data.
The accuracy is well within the five-percent margin established for larger Tier One emitters of up to 50,000 tons per year. We will press for this to be used as the MRV tool for business aviation up to the maximum degree possible. The huge benefit would be that you would get the data provided by an independent source and you wouldn’t need to have individual verification. This would reduce bureaucracy.

Our sector has never been loath to offset emissions. Indeed, companies like NetJets and Bombardier already do so but we object to excessive bureaucracy to calculate a small figure. We were eight percent of IFR traffic in Europe last year and less than one percent of all aviation emissions. We don’t need a heavy-handed tool that will cost people lots of money for such a small amount. It would not be proportionate legislation.

Under Pagoda, operators would get their annual emissions figure direct from Eurocontrol data. A typical business aircraft flight emits only about two tons of CO2. If you put the whole European business aviation fleet together, we are less than one small power station.

Is there any scope for private operators to get a commercial AOC in order to be able to get exemption from ETS?
It would be an option. Most of the big corporate operators already operate to public transport standards, so they could easily get AOCs. Some may decide that this is the best thing to do, but it won’t suit everyone to have limitations such as flight and duty- time rules. If we can get the simplified procedures accepted then it becomes a more viable proposition for these operators to stay under private rules. Emissions [credits] are currently trading at quite low rates. In 2012 it is anticipated to be about ?30 per ton, so it will not be an unaffordable price. What would be unaffordable would be the wretched MRV bureaucracy if we don’t get a simplified process.

Most European operators are aware of ETS, but what about all the operators from outside Europe who will be affected by it?

Yes, ETS will impact a huge number of U.S. operators, in particular. We are working with the NBAA on this. For example, if you operate into the UK and you haven’t filed how you intend to comply with ETS by August 31 this year you could face a £5,000 fine.

Eurocontrol has issued the list of operators covered by ETS. We are urging NBAA to make its members aware of this requirement and to find out to which country they have been allocated for compliance.

Everybody on the list has to be registered by Aug. 31, 2009, regardless of whether or not they want to apply for free allowances. The big concern is the lack of time. For example, the MRV guidelines have not been ratified, but operators need to register based on these by August 31.

It’s an almost impossible task. The only hope is that the detail you have to provide isn’t too much. If you just have to say that you will using the Pagoda model, then that is OK. If you have to meet the Entec guidelines, then it won’t be possible for one operator or the 772 on the UK list. And the UK Environment Agency won’t be able to cope with 772 operators either. The ideal scenario would be to have 750 of them on simplified reporting.

The officials accept this in theory but we still don’t have details of how it would work because the system hasn’t been verified. There is still doubt as to whether Pagoda can be verified in time, with a hold up over whether Eurocontrol could even become involved in emissions. We are starting the validation trial only in early April.

EBAA will also be looking at how operators trade emissions and we have until 2012 to fix this. We will continue to look at whether we could offer facilitation through a third party or through the association.