European bizav group criticizes ETS execution

 - October 14, 2009, 11:07 AM

Like it or not, and regardless of where they are based, many business aircraft operators who fly into European airspace will be required to account for the carbon they emit and ensure that they have bought enough carbon credits to cover this output when Europe’s emissions trading scheme (ETS) is fully up and running in January 2012. Some operators will be exempt (ETS for Aviation: the Theory on the below), but for those subject to ETS this will mean increased costs at a time when business aviation can ill afford more expenditure.

And to add insult to injury, operators trying to meet the requirement to register for ETS compliance before European officials start calculating their emissions baselines in 2010 have faced widespread confusion and bureaucratic chaos. Here at the NBAA Convention, a UK-based company called ETS Aviation (Booth No. 1648) is running an ETS helpdesk to try to guide operators through the maze (see Helping to Heal the ETS Headaches) The bureaucratic torpor and confusion that has mired the initial registration process for the introduction of Europe’s new ETS has brought the cap-and-trade approach to reducing aviation’s carbon footprint into disrepute, according to the European Business Aviation Association (EBAA). The group is launching a new lobbying effort aimed at convincing members of the European Parliament that, as it predicted all along, the cost burden entailed in bringing small operators into ETS has vastly outweighed the minuscule contribution that these aircraft make to air transport’s combined output of carbon dioxide (CO2).

According to the EBAA, of some 6,000 operators on the European Commission list for ETS, around 5,000 collectively account for less than one percent of total CO2 emissions. “This proves that the decision to include corporate operators in ETS was ridiculous,” said EBAA president and CEO Brian Humphries. “It is a bad regulation, badly executed.”

What’s more, according to Humphries, ETS threatens to have another unintended consequence in delivering a competitive advantage to non-European executive charter operators who have managed to remain beyond the requirement to report and trade in carbon emissions. EBAA’s members have reported that many large non-European operators do not fly more than ETS’s baseline threshold of an average of fewer than 243 flights over three consecutive four-month periods in European airspace and so are not subject to emissions trading (see box below). This means that they are not incurring the associated costs hitting just about all European operators for which this is a low threshold because the majority of their flying is within the continent.

“We are already aware of at least five N-registered [U.S.] operators who are managing to take [charter] business away from European operators in this way,” Humphries told NBAA Convention News. “As long as they fly fewer than 243 flights they can operate for free, and that means more unfair competition.”

Deadlines Are Problematic
New studies by the EBAA have estimated that a medium-size European business aircraft operator will incur costs of almost $100,000 in the first year of ETS. EBAA says that the EC has ignored the fact that operators are having to carry this additional burden at a time when the industry is already enduring a continuing downturn in demand.

Over the past couple of months, the main challenge facing operators has been simply to meet the initial requirement to register a plan for monitoring, reporting and verification (MRV) of CO2 emissions from their fleet. The August 31 deadline came and went, with many operators desperately struggling to work out which of the European national agencies they are supposed to report to and how to complete the process in the absence of clear guidance from most of the national authorities who are supposed to be implementing ETS.

Sweden and Italy belatedly confirmed extensions to the August 31 deadline for operators to register for ETS. Italy gave operators until September 30 to file MRV plans, while the Swedes granted an extension to October 15.

The UK’s Environment Agency extended the deadline until November 12 and did not have its online portal for registering MRV plans (the only acceptable means for doing so) available until September 17. Its German counterpart indicated that it would allow an additional six weeks or so, taking the unspecified deadline into mid-October.

In theory, the August 31 deadline still applied in the other 23 European Union states, despite the fact that the EC published a revised list of operators subject to ETS only on August 22. Furthermore, according to EBAA, the EC’s revised list of operators is still far from comprehensive and is riddled with errors, such as identifying flight planning groups that file operators’ flight plans with Eurocontrol as if they themselves were the actual operators of the aircraft concerned.

The list allocated each of the operators to a so-called “competent authority” in one of the 27 member states of the European Union. However, research by NBAA Convention News in attempting to contact these authorities revealed that in many cases they have failed to make adequate preparation to handle the high volume of bureaucracy associated with ETS. In many cases, the little information that was available was published only in the local language, rendering it useless to the majority of foreign operators.

In some cases, operators have complained that they were unable to make any contact with their assigned competent authorities, with repeated phone calls and e-mails going unanswered in the frantic days before the August 31 deadline–which fell at the conclusion of the European vacation season.

As of late September, almost a month after the deadline, the Hungarian government still had not even confirmed which of its departments would handle ETS.

Any operator included on the EC list that does not meet the deadline(s) for registering MRV plans can be hit with a fine of approximately $8,000, with an additional $800 for each day it continues to be late in filing. However, according to the EBAA, the national authorities implementing ETS on behalf of the EC are not expected to impose these penalties due to the long delay in publishing the list of operators and subsequent serious difficulties experienced by operators in trying to register their MRV plans.

The EC has rejected a long-standing proposal to use Eurocontrol’s Pagoda air traffic data system as a tool for calculating aircraft emissions. Instead, a revised version of Pagoda, dubbed the ETS Support Facility, is being evaluated and is expected to be accepted as a calculation tool.

The EBAA is pressing for data from the ETS Support Facility to be accepted as fully verified data that does not need to be independently verified at further cost to aircraft operators.

The EBAA believes that the ETS Support Facility has proved to have a margin of error amounting to less than one percent. On this basis, it believes there is a case for the EC to grant further latitude to the exemption that permits operators generating fewer than 10,000 metric tons of CO2 per year to escape ETS. It has argued that this threshold could be raised to 50,000 metric tons.  

ETS for Aviation: the Theory

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. Precompliance emissions monitoring will be conducted for flights in 2010 and 2011, and to be part of this, operators need to have their plans for monitoring, reporting and verification (MRV) approved by year-end.

Commercial operators who can be categorized as so-called small emitters can, in fact, be completely exempt from the ETS process and will not have to monitor, report and verify their emissions. To be classified as a small emitter, commercial or private operators need to prove that they have flown fewer than 243 flights within European airspace over three consecutive four-month periods (equivalent to an average of two flights per day over the course of a year, i.e., fewer than 730 flights in total per annum). An alternative exemption is available if an operator’s fleet generates fewer than 10,000 metric tons of CO2 each year. Operators who conduct some flights under commercial rules and some under private rules need to calculate whether all their flights combined would fall below the thresholds.

Commercial operators falling under either of these thresholds can report this to their assigned government agency and claim a full exemption from reporting an MRV plan, and from subsequent MRV activity and trading in emissions. However, the list of ETS operators will be revised annually each February 1, so operators whose flying activity subsequently takes them above the small-emitter thresholds will then have to register an MRV plan for ETS compliance.

Private operators can also be categorized as small emitters under the same terms. The difference is that they still have to both report their emissions through the MRV process and trade in emissions from 2012.

Private/Commercial Dilemma
Management companies that routinely have to operate the same aircraft under commercial rules one day (with themselves designated as “the operator”) and then under private rules another day (with the aircraft owner designated as “the operator” in this situation) have faced a dilemma as to how to register for ETS. At face value, the rules suggest that such a company would have to file an ETS plan for itself as operator and then separate ETS plans for all its various private-owner “operators” under Part 91 rules. Then it would be faced with the bureaucratic nightmare of monitoring, reporting and verifying emissions for all these various flights and keeping all the data straight.

Official guidance on this issue has been far from clear. An official at the UK Environment Agency has indicated that this paradoxical situation is being reconsidered and fresh guidance may be issued in time for companies registering their MRV plans.

Ostensibly, it would appear that for ETS purposes “the operator” is defined as whichever individual or entity is identified as “the operator” in the aircraft registration records associated with a specific aircraft tail number. This is because the main data tracking point for ETS is Eurocontrol’s Central Route Charges Office database, which logs all flights made in European airspace.

According to ETS Aviation, government agencies are aware of the dilemma and have essentially accepted that it will be too complicated to distinguish between the exact status of the defined operator for the same aircraft flying under different rules. The company anticipates that agencies will effectively accept just one registration from the entity they regard as the main operator; in this instance, the management company.

The precompliance emissions monitoring will measure each aircraft’s emissions in terms of metric tons of carbon dioxide (CO2) per kilometer flown. In fact, operators do not have to take part in this benchmarking process beginning next year, 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.

Credits can 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 being spent on measures intended to deal with 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.

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 ($160) per metric ton of CO2.

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.

The EC list of operators, along with more information, can be found on the following page on the EC Web site: http://ec.europa.eu/environment/climat/aviation_en.htm. More information on the ETS process can also be found at the UK Environment Agency Web site: http://www.environment-agency.gov.uk/business/topics/pollution/107596.aspx.

Cessna has posted guidance on its Web site for Citation operators needing to register for ETS compliance: www.cessnasupport.com/Carbon Emissions. The following models fall into the ETS net: Citation CJ3, Citation II, Bravo, S/II, V, Ultra, Encore and Encore+, Excel, XLS, XLS+, III, VI, VII, Sovereign and Citation X.

Helping To Heal the ETS Headaches

Former NetJets Europe and TAG Aviation executive David Carlisle set up his own company, ETS Aviation, to help aircraft operators handle compliance with Europe’s new emissions trading scheme (ETS). Here at the NBAA Convention, the company is running a help desk at Booth No. 1648 to guide operators through the ETS maze and help them prevent the requirement from becoming an onerous chore.

Working with partners to develop a two-pronged solution, ETS Aviation is offering both specialist software called Aviation Footprinter to allow operators to calculate their emissions tally and also an online process for getting their emissions reports verified independently as required under ETS. The company is demonstrating Aviation Footprinter at its exhibit and is offering incentives for companies that buy user licenses before December.

“I’ve talked to operators all over Europe who are very worried,” said Carlisle. “For some the deadline for submitting MRV plans has passed, and for others it’s very close, but they still haven’t gotten to grips with all the details of the European Union directives and the draft reporting templates. There is a mountain of paperwork to absorb. Yet most operators and airlines are having enough of a struggle to survive. This is the last thing they need. What we do is more than just a hand-holding exercise. We take them through the whole process.”

Operators can use the Aviation Footprinter software to record, monitor and report their carbon emissions and calculate how many credits they need to buy to cover them under ETS requirements. It has been developed from the existing Footprinter software created by Oxford-based Best Foot Forward for other industries that are already subject to ETS. According to ETS Aviation, the Web-based system can help operators almost completely automate the monitoring, reporting and verification tasks.

A separate company, Verifly Online (VOL), has been set up by Carlisle’s partner Denis Quinn. The firm will help aircraft operators comply with the verification process entirely online and without the need for time-consuming site visits, which are commonplace for other industries already subject to ETS.

Last month, VOL formed a partnership with accredited carbon verification company Gastec to give aircraft operators direct access to an organization already approved by EU authorities to handle the ETS verification process. “Using our software, we aim to provide the necessary audits online whenever possible and at much lower cost,” explained Carlisle.

In Quinn’s view it is important that aircraft operators can deal directly with people with a sound understanding of how aviation works so that they don’t have to waste time explaining aspects of their business to verifiers. ETS agencies could require site visits if operators inadvertently misreport data or leave gaps in the information they provide.

“VOL’s online service will undoubtedly pass on significant cost savings to operators who may be based anywhere in Europe or even farther away,” said Quinn. “Our auditors will understand how the aviation industry works and speak the same language. Using the inbuilt quality check processes of our specialist software, alongside risk analyses of the operator’s internal controls and quality systems, we’ll be aiming to keep site visits to an absolute minimum.”

Carlisle told NBAA Convention News that both Aviation Footprinter and Verifly Online are especially well suited to the needs of small- and medium-size aircraft operators who do not have the resources to develop their own internal ETS processes. He added that using the right software tools to assist with emissions reporting could have spin-off benefits in terms of helping them to audit their operations more efficiently. For instance, Aviation Footprinter will generate data to help operators make decisions on fleet utilization that will reduce carbon emissions and reduce both their carbon footprint and their operating costs. It will also look for errors in recorded data and also automate much of the data aggregation task.