EU-ETS for Business Aviation: Implementation, Costs, and Risks of Non-Compliance
This aviation blog post is part of a series on EU-ETS for business aviation and continues from our last post on EU-ETS 101: Introduction to EU-ETS for Business Aviation.
Once you’ve registered an aircraft emissions monitoring plan with your assigned member state, you’ll need to track, monitor and report all applicable flight legs. Emissions reports must be verified by an independent 3rd-party and submitted to your member state annually. Fortunately, much of the European Union Emissions Trading System (EU-ETS) administrative detail and reporting functions can be offloaded to a 3rd-party provider. As an operator, however, you’re responsible for determining which flights are “reportable” according to EU-ETS regulations – as well as for securing any carbon credits required for operations to, from and within the EU.
1. How do you monitor and report aircraft emissions?
You must register an emissions monitoring plan with your member state indicating procedures you will use to provide accurate data. You then use these approved procedures to collect data.
Operators who emit less than 10,000 tons of CO2 annually operate no more than 243 covered flights per three consecutive four-month periods (one year) qualify to report using the Small Emitters Tool. This tool was developed by Eurocontrol (the European Organisation for the Safety of Air Navigation) to enable aircraft operators with few flights or emissions to use simplified monitoring procedures. The 10,000-ton CO2 limit – the equivalent of burning 7,000,000 of fuel annually – covers virtually all corporate operators, most of whom will qualify for the Small Emitters Tool. Version 2 of the Small Emitters Tool was issued in November 2011. You must use this version for all calculations and reporting, starting with calendar year 2011. (Version 1 had inaccuracies for certain general aviation aircraft and has been corrected with new algorithms in Version 2.)
The tool uses two pieces of data: aircraft type and distance in nautical miles (nm). For each reportable flight leg, you add great circle distance (GCD) and 95 kilometers (km) per flight leg and convert this sum to nm. You input this distance, along with aircraft type, and the program calculates a CO2 emission figure.
At the end of the year, you’re required to have your emissions report verified by an accredited 3rd-party verifier. In most cases, verified reports must be submitted to your member state by March 31st of the following year. There are some differences to consider among member states. While most accept electronic reporting, both Italy and Spain requested hard copies of verified reports for 2010. Additionally, Spain requires submission of verified reports by February 28th, while the Czech Republic has a deadline of March 15th.
After receiving your verified emissions report, your member state will submit it to the European Commission (EC). The EC wants to make sure the program is working and that member states are obtaining the required information. Your member state will reply – confirming that they agree on the amount of CO2 you’ve emitted – and will indicate how many carbon credits are owed. Keep in mind that carbon credits will only be required for flights beginning January 1st, 2012, and you’ll be “billed” for these credits after submitting your annual report in early 2013. You’ll have until August 31st, 2013, to purchase required carbon credits for 2012 operations – through an auction format – and submit receipts to your member state. We anticipate that carbon credits, due in 2013, may trade in the range of 15-25 Euros per ton of CO2 emitted.
2. What is the cost of complying with EU-ETS?
The cost of complying with EU-ETS includes flight department recordkeeping, administrative costs from your member state, the cost of verifying your annual emissions report and the cost of carbon credits. An example of CO2 emission numbers we’ve seen so far for an active fleet of corporate aircraft is about 3,000 tons. The cost of carbon offsets for this volume of emissions may be about 60,000 Euros per year. For operators who fly to Europe only occasionally, total carbon credit costs will be relatively low, but they will still have to comply with all the administrative requirements. The EU-ETS is another cost that needs to be factored into the cost/benefit analysis when planning a flight. For example, if you make a stop en route to Europe, this may reduce your EU-ETS “carbon footprint.” However, the cost of making this additional stop would likely outweigh carbon credit savings.
3. What are the risks of non-compliance?
Compliance with EU-ETS is mandatory. While there are various court cases in progress – initiated for the most part by U.S.-based airlines – they do not seem to be making any progress. The 2009 Open Skies agreement was designed for this type of unilateral environmental legislation, as long as there is fair and equal opportunity to avoid double taxation. Other countries that enact their own programs – with similar effect – will be immediately exempted from the EU-ETS. Their operators will be subject to their countries’ programs and not the EU-ETS. For the time being, international operators have no choice but to comply. If you’re doing business internationally, you cannot run the risk of being penalized financially or operationally. Best practice is to work toward, and maintain, compliance.
If you are looking for more information on how to comply with EU-ETS or if you would like to subscribe to EU-ETS activity reminders, you can visit our free EU-ETS Reporting Resource Center.
If you have any questions about this article, contact me at email@example.com.
Later, we will discuss administering aviation EU-ETS and the future state of this program.