Chinese and Indian airlines come into compliance with EU ETS as Swiss case moves to EU's highest court

Chinese and Indian airlines come into compliance with EU ETS as Swiss case moves to EU's highest court | ECJ,Air China,China Southern,China Eastern,Saudi Arabian Airlines,Saudia,Ethiopian Airlines,SWISS,Aeroflot

Air China has operated a regular intra-EU flight between Athens and Munich

Tue 19 May 2015 – Following a long dispute with the EU over their enforced inclusion in the EU Emissions Trading Scheme (EU ETS), airlines from China and India have finally complied with legislation covering intra-EEA flights that took place in 2012, as well as for 2013 and 2014. The airlines had previously been ordered by their governments not to comply despite a change in the scheme that removed intercontinental flights from the original scope. Air China, China Eastern and China Southern, along with India’s Jet Airways, have now opened operator holding accounts and the EU registry shows reported emissions and surrendered allowances for the three years. However, Air India has still failed to comply, along with Aeroflot and Saudi Arabian Airlines, whose authorities had also instructed non-compliance. Meanwhile, SWISS has been given permission to pursue a discrimination and compensation claim in the EU’s highest court over the inclusion in the EU ETS of its flights between Switzerland and EEA countries during 2012.


The international clash over the Aviation EU ETS saw a number of major powers – China, India, Russia, the USA and others – coming together in 2011 and 2012 as the ‘Coalition of the Unwilling’ to fight the EU’s plan to include all flights arriving or departing its airports in the EU ETS (see article). In the face of such opposition and to help progress ICAO negotiations on a global market-based measure, the EU relented and introduced amending legislation, known as ‘Stop the Clock’, that reduced the scope to intra-EEA flights only in 2012, the first year aviation was included in the scheme. The scope was reduced still further and extended to include the period 2013-2016 in new legislation enacted in early 2014.


Since the scope was reduced to intra-EEA flights, the United States has dropped its opposition to the scheme and most US airlines and cargo and business jet operators have been in compliance. However, airlines from India, China and Russia have up till now failed to report emissions from flights on routes between European airports taking place in 2012 and surrender the required permits, even though mandated under the EU legislation to do so by 30 April 2013. Behind the scenes efforts by authorities in the EU States responsible for administering those airlines to persuade them to comply have, up till now, made no progress. To avoid political confrontation, although States are required to release lists of non-compliant operators, the names of the airlines from these countries have so far not been officially published.


Under the revised EU legislation, the years 2013 and 2014 were regarded as special cases and instead of reporting annually, operators were required to report emissions for both years by the end of March this year, with the required number of permits to be surrendered by the end of last month.


According to the European Union Transaction Log (EUTL), which records and authorises all verified emissions and the surrendering of permits of individual operator accounts, the three Chinese airlines, including Air China’s cargo subsidiary, and Jet Airways have surrendered over 63,000 permits in total – equivalent to 63,000 tonnes of CO2 – between them for the three-year period. During that period, Air China has operated regular passenger flights between Athens and Munich, China Southern between Amsterdam and Vienna, and China Eastern between Frankfurt and Hamburg. The EUTL is not definitive on whether the emissions by the four airlines have been independently verified and approved by their respective EU administering authority.


Jet Airways recently lost a legal appeal against the UK in which it argued that the unilateral inclusion of the airline into the EU ETS did not accord with the global consensus reached by ICAO Assembly resolutions and that the Indian Government had prohibited it from complying (see article). The airline told GreenAir it did not wish to comment on the case and it is not known if it has now received permission to comply following the adjudication.


So far, no operator holding accounts have been opened for the government-owned flag carrier airlines Air India and Aeroflot, whereas other smaller Russian and Indian aircraft operators have complied with the EU ETS provisions. Flag carrier Saudi Arabian Airlines, whose government was also a leading member of the international anti-EU ETS coalition, is understood to have been fined €1.4 million ($1.6m) – one of the biggest single fines handed out – by the Flemish authority, to which it reports.


The EU ETS legislation insists on mandatory fines of €100 per tonne of CO2 for non-compliance by the end of the following April deadline and some EU States, such as Germany (see article) and Italy, have recently published lists for non-compliant aircraft operators in 2012. Air China and Aeroflot, which report to the German environment agency DEHSt, were not listed as their cases were not regarded as definitive.


A report in Carbon Pulse, says the UK authorities have fined six overseas aircraft operators, including Air India, a total of €113,000 ($128,000) for failing compliance in 2012, with the possibility of further penalties to come. UK legislation requires the publication of a full list of non-compliant operators on an annual basis by the end of each June.


Another non-European carrier which had previously failed to comply, Ethiopian Airlines, notched up nearly 20,000 tonnes of CO2 emissions from intra-EEA flights in 2012 and is believed to have been fined by the Italian authorities (see article). However, the EUTL now shows the African carrier has surrendered 62,655 permits covering the 2012-2014 period, almost as many as the four Chinese carriers and Indian airline Jet Airways combined.


Barry Moss, CEO of Avocet, an aviation risk management company that tracks EU ETS compliance issues, said: “It is pleasing to see that a number of previously defaulting airlines are now complying with EU ETS. What remains uncertain is whether the non-negotiable penalties have been enforced by regulators and paid by those airlines for the 2012 emissions compliance year. If the EU wishes the EU ETS to be non-discriminatory to compliant operators then each Member State must act within the EU Directive as transcribed into local laws.” 


Meanwhile, in an appeal heard in the High Court in London, Swiss International Air Lines (SWISS) has won a referral to the European Court of Justice (ECJ) of its claim that it was unfairly discriminated against when EU/EEA flights to and from Switzerland – a non-EU and non-EEA country – were not exempted from the EU ETS under the ‘Stop the Clock’ derogation for the year 2012. Under the EU ETS regulation, SWISS is administered by the UK.


When the European Commission was drawing up the temporary suspension, it was in negotiations with Switzerland over linking the EU ETS with the Swiss domestic equivalent and the Commission had cause to believe the Swiss authorities were amenable to having Swiss flights included in the revised intra-EU/EEA only scope. However, the pace of the negotiations, which started back in 2010, have been slow but according to Carbon Pulse, an agreement is now expected this year, with aviation expected to be included.


When the scope of ‘Stop the Clock’ was further revised for the period 2013-2016, flights to and from Switzerland were included in the suspension, but SWISS is claiming it was unfair for these flights not to be also excluded in the EU carbon scheme’s 2012 trading year. The airline’s EUTL entry shows it racked up carbon emissions totalling just under 1.23 million tonnes in 2012 on its flights to and from EU/EEA countries, and received an allocation of nearly 600,000 free allowances, leaving it to purchase around 630,000 allowances. Assuming a trading price of around €6 per tonne and allowing for the fact that a proportion of the emissions would have come from intra-EU/EEA flights and so liable anyway under the revised scheme, the cost of purchasing the required allowances could have been over €3.5 million ($4m), for which the airline is seeking reimbursement from the UK in its claim.


An earlier court ruling found that the principle of equal treatment did not apply to differential treatment by the EU towards non-EU member states such as Switzerland and that even if the principle did apply, it had not been breached in this case. However, in a High Court appeal ruling by Lord Justice Vos, it was found that sufficient doubt existed to the scope of the principle and its application in this case to justify a referral to the ECJ, the only court with jurisdiction to rule whether an EU directive was invalid.


“It seems to me that there is some force in the argument that the Commission and the EU legislature have not yet sought to justify Switzerland’s exclusion,” he said in his decision. “I would also be the first to accept that Switzerland is in a very different position to many other third countries politically, economically and geographically. But that does not necessarily provide automatic justification for it having been singled out.”


A SWISS spokesman confirmed to GreenAir that the airline would pursue its case through the ECJ but declined to comment further on the details.


If the ECJ was to rule in the airline’s favour, it would have implications for all other airlines that flew to and from Switzerland in 2012 and reported the emissions for those flights and subsequently paid for and surrendered allowances to cover them.


The European Commission reported yesterday the level of compliance by aircraft operators for the 2013-2014 period was high, with 99% of aviation emissions covered under the EU ETS, including by more than 100 operators based outside the EU that operate flights within the EEA. It said verified CO2 emissions from aviation activities carried out between airports located in the EEA amounted to 54.9 million tonnes in 2014, up from 53.4 million tonnes in 2013, an increase of 2.8%.




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