Airlines prepare to enter Europe’s ETS as aviation directive comes into force

10.2.2009   (GreenAir Online)

The directive incorporating aviation into the European Union’s Emissions Trading
Scheme (ETS) entered into force last week, obliging EU Member States to pass appropriate
legislation and make administrative provisions before 2 February 2010. Aircraft
operators flying within or to and from Europe are required to enter into the first
phase of the European Commission’s Monitoring, Reporting and Verification (MRV)
process. During 2009, operators who fall within the scope of the ETS will have
to submit monitoring plans to their relevant ‘competent authority’ or Member State.
Meanwhile, Europe’s statistical agency reports that air passenger transport in
the EU27 states rose 7.3% in 2007.

To coincide with the ETS directive coming into force, the Commission was due
to publish by February 1 a list of aircraft operators covered by the scheme but
this has been delayed. The list, which will also include the relevant competent
authority for airlines based outside the EU and operating more than one flight
to and from a Member State airport per day on average, is due out "shortly", according
to a Commission official involved with the MRV process.

"The timetable presented was a target. So far we are still on track but it is
impossible to be 100% sure that this will be achieved as there are many different
stakeholders in the decision-making process who all need to participate  in and
contribute to achieving the timetable," he explained to GreenAir Online.

The rest of the timetable for 2009 has been set out as follows:

·                 June 2009: Commission to adopt MRV guidelines for aircraft operators.

·                 By August 2: The Commission is to have developed guidelines on the detailed interpretation
of the categories of aviation activities to which the ETS directive applies (Annex
I of the directive). The Commission is also to decide on historical aviation emissions,
based on best available data, including estimates based on actual traffic information.
The historical base for the ETS cap is set at the average of the years 2004 to

·                 By August 31: Aircraft operators to submit monitoring plans.

·                 During third quarter 2009: Approval by Member States/Competent Authorities of
pre-trading monitoring plans.

·                 During 2009 (date to be confirmed): Adoption of regulation on auctioning.

Eurostat, the statistical agency for the European Communities, reports that the
total number of passengers transported by air in the EU’s 27 Member States totalled
793 million, a rise of 7.3% in 2007 compared to 2006. In 2006, passenger numbers
increased by 4.7% over the previous year.

The numbers in 2007 rose in all 27 States, with four eastern European countries
– Romania (+41%), Latvia (+27%), Poland (+25%) and Lithuania (+22%) – recording
the biggest growth in 2007. The countries with the highest number of air passengers
were the United Kingdom (217 million, +3%), Germany (164 million, +6%), Spain
(164 million, +9%), France (120 million, +6%) and Italy (106 million, +11%).

Of the total number of passengers transported by air, 22% were carried on domestic
flights, 44% on intra-EU27 flights and 34% on extra-EU27 flights.

As airlines prepare for the ETS, the price of carbon allowances (EUAs) is now
close to a record low, having declined steadily over the past month by more than
40% to just over €10 ($13). This is partly due to the decline in energy prices
like oil but also caused by decreased production in carbon emitting industries
leading to companies selling credits they no longer need in order to boost flagging

Since the scheme began in 2005, the carbon price has closely aligned itself to
energy prices and is seen by some traders as a hedge against high oil prices.

Carbon market analysts Point Carbon believe the price will recover to the €20
level when production levels eventually increase and as the current phase of trading
approaches in 2012, just as the aviation industry enters the ETS. Looking ahead
to the next trading period starting in 2013, Point Carbon predicts the price of
credits will be pushed considerably higher as lower emissions caps begin to bite.

Other analysts say that a price of €25, or even €45, is necessary to make a real
impact and tip the economic balance for companies in favour of making investments
in clean technologies and efficiency improvements.

With regard to the impact of the current carbon price on those in the aviation
sector considering their ETS strategy, Andrew Pozniak, CEO of consultancy Green
Aviation International, says: "The combination of falling carbon prices coupled
with the credit crunch is going to significantly reduce investment into carbon
origination schemes. This means that when industrial and aviation demand for carbon
allowances recovers by 2012 there will unfortunately be a crunch on the supply
side and last year’s  highs of €34 per tonne could be exceeded. The airlines still
having some cash might  do  well to  lock in at today’s prices."




European Union Directive on including aviation into ETS

European Commission – ETS MRV


Point Carbon

Green Aviation International