Posts Tagged ‘Carbon Emissions’
-EU ETS will include Aviation from 01 JAN 2012
-The UK Deadline for filing your benchmarking and emissions plans is 31 March 2011
-Are you included on the latest list of operators issued by EUROCONTROL in early February 2011?
-Do you know if you are covered by EU ETS?
-Do you know what flights are exempt from EU ETS, and are your included?
-If you are not sure what to do in regard to EU ETS, or even are unsure if you are covered by the new regulations please feel free to get in touch. We can help!
The EU Emissions Trading Scheme (EU ETS) is set to include aviation from 01 JAN 2012. EU ETS brings with it a whole new level of new dynamic market pricing that aircraft operators will need to factor into their formulas, and if initial estimates are correct we could be talking about anywhere from €5-18 per passenger (depending on the route) if prices for EUAs stay at today’s levels.
Before we get to that point, however, there are many foreign carriers and aircraft operators who may not be aware that they have been listed on the latest version of EUROCONTROL’s ANNEX I. Are you? If you are not sure you can refer http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:039:0001:0120:EN:PDF
While many of the US carriers have filed suit to contest this EU Directive (and the individual EU Member State Laws related to it) and that the has not yet been ruled on by the European Court of Justice. The US airlines involved are still, as we understand it, voluntarily complying with the requirements of the scheme. For other carriers this means those who are not exempt from the scheme have hopefully already applied for the “allocation of free credits” as well as submitted benchmarking plans, obtained certifying bodies, and put in place monitoring plans that are acceptable to their respective EU State they have been allocated to by 31 MAR. Carriers are due to hear in September of this year from their regulatory EU Member State as to what their share of the “special reserve” or other “free credits” are to be.
Last Monday the EU made the formal announcement about the final CO2 caps, and the simple math says that while approximately 80% of the carbon credits needed by the industry will be part of the free allocations, that leaves 20% subject to market forces. With an EUA trading at around €15-16 at the moment, there is some level of exposure to the several thousand of the world’s carriers operating into the EUROCONTROL zone.
Some analysts are looking for a price correction with the introduction of AAs to the ETS marketplace, with some projections taking them up to €18-20 per credit. I believe the number will be somewhere between €19-22 when AAs are introduced to the market, based on the projected shortfalls, and also a number of non-EU carriers who did not meet the criteria for a “free allocation” scramble to cover their exposure not fully understanding that the first point of surrender of these credits is not until MAR-APR 2013. So airlines, and other air carriers, have time to play the market a bit and participate in EU Member State auctions to make up their shortfalls. Though we would not want to be in the market for significant AAs or EUAs in early 2013!
Many of our foreign carrier aircraft operators have required some assistance with the regulations, compliance, and even just the overall processes involved in the scheme. If you are need of assistance or support, we would be happy to help! Please feel free to contact us today at +44 208 588 0602 for an initial consultation.
In Todays Issue:
- - The Bullet
- - Summary of the Key Findings
- - Carbon Emissions: A Damning Indictment
- - The “Open Skies”?
- - TWC’s Take on the Report
- - Who says politics can’t be funny
This morning, The U.K House Of Commons Transport Committee published its initial findings to the Government on their enquiry “The Future of Aviation”. The enquiry began in late February of this year with a broad scope to elicit information from the public, the industry, and other interested parties on the Future of UK Aviation.
Committee Chairman Louise Elleman MP, said in a statement, “Aviation is an important part of the UK economy, both in the south east of England, and in the regions.”
The Committee goes on to say that the Government’s long term basis of Aviation Policy- a 2003 white paper- “continues to provide a sound basis for aviation policy but warns the Government that it must update its assessment of the economic value of aviation for the UK economy regularly to ensure its figures are subject to independent external scrutiny.”
Carter Stewart, Managing Director of TWC Aviation, a London-based Aviation Consultancy agrees. “We believe that the overall net economic contribution of aviation to the U.K. has been under-valued by the Government by as much as £800M GPB annually”
The Key Findings of the Report: Overall Good News for the Industry
In summary the statement from The Committee makes the following additional recommendations:
The Committee supports the Labour Government’s London Heathrow expansion proposal; but calls into question the Stansted expansion and instead suggests London Gatwick may be more appropriate.
While The Committee “recognises the importance of Air Passenger Duty (APD)” it suggests that the Government needs to be “mindful of the vulnerability of the aviation industry in the current economic climate.”
Carbon Emissions: A Damning Indictment of the EU – Sane Words to the Industry
The report could not be complete without also addressing the issue of Carbon Emissions and noise pollution. The Commitee says in their report that aviation should not be “demonised or assigned symbolic value beyond its true impacts.” It went on to comment that they had concerns that “The EU Emissions Trading Scheme has an appaling track record and may prove insufficient to to drive investment into low carbon aviation”
Regarding Carbon Emissions, the report sets forth a “number of principles that should be applied in this area.” It also refers us to the publication of the UK Climate Change report that is due to be published on Tuesday, 08 December. They also called on industry to “sensibly reduce its greenhouse gas emissions over the coming decades.”
The “Open Skies?”
“Discussions to extend the Open Skies agreement are ongoing between the European Commission and the US Federal Aviation Administration. This might allow further access to EU and US markets. The asymmetric nature of the Open Skies agreement is disadvantageous to the UK economy and particularly to the UK regions, and should be renegotiated at the earliest possible opportunity.”, the report says.
The report also reiterates MPs previous calls for the ATOL levy to be increased and extended to include all international flights. Currently, ATOL is only applied on package holidays from the U.K.
It also asks The Government to clarify the “basis of its claim that an additional £10 bn could be raised if VAT and Fuel duty were applied to Aviation.”
The key conclusion is clear. ”We beleive that the aviation industry is a very important to the UK Economy. Therefore we find it unsatifatory that the Government leaves such a key industry to the vagaries of the market.”
Our Take of the Reports Findings
“Overall we believe that the report is a good news story for both the industry and consumers,”, Stewart says. “At this critical economic time for our country the aviation industry, and airline consumers, have been suffering at the hands of the taxman disproportionately to other industries.”
“In a recent speech to The UK Aviation Club in September, The Lord Adonis defended the recent APD increase by saying it was ‘a matter of published policy’ and as a result ‘it would not be changed.’ I am glad to see members of the Transport Committee are calling into question the potentially damaging effect this policy has on UK airlines and airports to compete with other European rivals.”
“One of the most telling items from our perspective is the language used around the US Open Skies agreement.”, says Carter Stewart. ”With talks between the US and Japan about to start today this is not the ideal moment for a key U.S. shortfall to come into such scrutiny. We agree that US liberalisation promises have failed to truly materialise for the UK, and promises about foreign ownership are key”
“With US carriers vying for ownership and control deals with JAL, I simply hope that the Japanese keep in mind the key points of reciprocity in their agreement and have clear understanding and timetables from the outset.”, Stewart says.
“It is also refreshing to see MPs pushing back on behalf of the industry and consumers by demanding clearer answers on proposed estimates on tax revenue from VAT on tickets and fuel levies”, Stewart says.
Todd Koonce, Manager of Technical Operations at TWC Aviation believes that the report does hit some of the right notes about aircraft technology. “It is obviously to everyone’s benefit to phase in more efficient aircraft as soon as is financially and operationally viable. The key issue for many carriers has been the delivery delays of these very aircraft, like the 787 and A380, from the manufacturers themselves.
“I also believe that for short-haul segments, the efficiencies of turbo-prop aircraft have been overlooked by the airlines. There is also a public perception that regional jets are somehow safer, and more comfortable, when there is an argument to be made that latest generation of turboprops could offer lower emissions and better operating margins.”
Proof Positive of Humour in Politics
For those of your interested in the initial white-paper, here is a little bit of the background and history.
H.M. Government has for some time used a white paper entitled “The Future of Air Transport”, published in 2003, as the basis of U.K. Government Aviation policy. Ironically, it was then Alistair Darling, then Minister of State for Transport (and now current Chancellor of the Exchequer) who introduced the reports findings to the House of Commons on 23 of July 2002. Even at that time, then Minster Darling was making a case that the U.K. needed to keep pace with capacity demands, and understood the importance of our air gateways which needed to compete with the increase in market share by Continental European airports.
What a difference a few years, and a change to Chancellor can make.
(A full text of his statement to the House in 2003 can be found here, at the 1530 time marker.