European Commission further delays publication of aviation emissions cap for EU ETS
Fri 2 Oct 2009 – According to a Bloomberg report, the European Commission is to push back until next year publication of the aviation emissions cap which airlines and operators entering the EU Emissions Trading Scheme in 2012 will be subject to. Under the Aviation EU ETS Directive, the Commission was required to issue details by August 2 of the cap, based on a three-year average of total emissions between 2004 and 2006. However, industry associations had expressed doubts about the accuracy of the data that was being examined and many, although not all, will feel that a postponement is the best outcome. The all-important cap will be used to determine the level of free allowances operators will receive and how many will have to be purchased.
For 2012, the total quantity of allowances allocated to operators will be 97% of the cap, falling to 95% from 2013 subject to review.
No official announcement has been made by the Commission, and GreenAir Online has been unable to get confirmation, but the aviation industry itself will not be surprised by the reported delay. It had serious concerns that the cap would be set too low, forcing operators to buy more allowances from 2012, and it is in its interests that the industry’s CO2 emissions to be as high as possible for the 2004-6 period.
Quentin Browell of IATA said the initial estimate of the average emissions for the period of 216 million tonnes of CO2 was inaccurate since it did not take account of emissions on the ground, emissions in terminal manoeuvring areas (TMAs), extra emissions caused by route extensions caused by air traffic control restrictions or extra emissions caused by aircraft held in holding patterns before landing. There has also been a demand from operators that emissions from APUs be also included.
“We are pleased that the Commission is rethinking its calculation of the cap and we hope it comes back with a more realistic figure in due course,” he said. “We want a baseline that is robust and well calculated so a delay is probably acceptable if we achieve that. But I think the delay is one more indication that the EC didn't think this all through before they adopted the ambitious timeline. The Commission keeps on breaking its own deadlines, first with the list of airlines operators and now with the publication of the baseline.
“The delay also means that it will be harder for airlines to estimate their future need for allowances. They cannot calculate what proportion they will need to buy on the carbon market, so they can't really prepare properly for the ETS until there is greater clarity on the baseline and cap.”
Julien Dufour of aviation ETS consultancy SustainAvia agrees that the delay will not help operators perform their financial impact analysis and estimate the number of carbon credits that will be available but he believes the postponement will have no real implications. “The EC will start collecting the reported tonne-kilometre from operators in 2011 and is not expected to announce the number of free allowances to be granted to each operator before mid-2011,” he said. “This means we could wait a further two years for the cap announcement without it making a difference.”
Andrew Pozniak, Managing Director of Green Aviation International (GAI), said the delay was yet more evidence that the Commission’s imposed timescales had not been adequately planned and more delays could be expected.
“It’s really surprising that it is taking so long to validate historical emissions data from at least three years ago, especially as there are some organizations which possess highly accurate technical data on aircraft operator fleets,” he said. “Moreover, several airlines have also provided technical data to Eurocontrol to help them refine their assumptions. Whatever the problems they have encountered, it is financially very important for the airline industry that they sort it out and that the baseline is correct because free allowances worth many billions of Euros will be based on these numbers all the way through to 2020.
“In terms of any impact of this delay, this is just another one, on top of the delays by several EU Member States in respect of the Monitoring Plan submissions deadlines.
“From our own direct experience of advising clients on the ETS we have seen that for the operators it has been very challenging to meet these deadlines to say the least, and we suspect that the great majority of the other operators who could not access internal or external experts could not have submitted very meaningful Monitoring Plans in the time allowed. This is going to provide yet another headache for the EU in due course.”
Pozniak called for the start of the Aviation EU ETS to be pushed back a year to start at the beginning of 2013.
“This makes more sense since 2013 is the start of the EU ETS ‘third trading period’ and also coincides with the proposals to add other industries such as shipping, aluminium production and chemicals. The delay would make the involvement of aircraft operators far more robust, accurate and relevant.”
Sebastian Gallehr of ETS consultancy Gallehr & Partner said the hold-up was a further sign of a mistrust that existed between the aviation sector and the Commission. “Every market-based political instrument only works if it is based on reliable and foreseeable fundamentals between the partners, and the Commission is failing in this respect,” he said. “It isn’t fair to announce deadlines that must be adhered to by everyone else but not by those who issue them.”
He stated that airlines could save up to 70% of the potential costs of the EU ETS but only if they started as soon as possible with the planning of their emissions rights portfolio, hedging and sourcing strategy.
“One important fundamental for developing the individual sourcing strategy is to know the real numbers of available EU Aviation Allowances in the market for calculating their own short or long position,” he said. “The later these numbers are available, the more the uncertainties the airlines will face in defining their strategies. Even if they are doing their homework and are developing as soon as possible a suitable ETS strategy through till 2020, they have to take into account certain unnecessary risk parameters which are limiting the cost reduction potential.”
