EU Emissions Trading Scheme Update

European Union Emissions Trading Scheme Update —
Originally published in BusinessAir Magazine, April 2013, Volume 23, No. 4.

April 2013 is proving to be a challenging month for many aircraft operators who fly point-to-point within the European Union (EU) and haven’t already taken the necessary steps to establish a registry account for the EU’s Emissions Trading System (ETS). Point-to-point flights within the EU must comply with the ETS, even though the EU has temporarily postponed enforcement of the ETS for international flights. On April 30, 2013, operators must surrender the correct number of allowances from their registry accounts to cover their carbon dioxide emissions. This means a registry account must already have been established with the appointed member state in order to surrender the allowances on that date.

Compliance with the ETS has proved difficult for many aircraft operators in the United States. All operators are assigned a specific EU member state as their regulatory authority within the EU-ETS; however, the member state that is assigned as the entry point for each operator is random and the requirements of each member state vary. Once an operator is assigned to a member state, that operator must submit its monitoring plan within the timeframe established by the specific member state. The process and timing for submission of the monitoring plan is dictated by the specific member state and varies from one member state to another. Many of the United States operators who have started this process have found it to be time-consuming and invasive. Operators are struggling, at the outset, with the amount and type of information required in order to establish a registry account. Owners who have established an ownership structure in order to protect confidentiality and achieve their tax goals are finding they are left with very few options, depending on the member state, in protecting their confidentiality.

Regardless of the process of the specific member state and the disclosure requirements, all operators must be ready to surrender emission allowances on April 30, 2013. The April 30 deadline is for submitting credits to cover carbon emitted on flights between EU airports during 2012. This requires that the operator open an EU registry account in its appointed member state and submit the allowances by the deadline or face penalties. The credits for surrender of emission allowances have to be submitted via an approved EU registry account, and setting up this alone can take 30 days. Operators face fines of €100 (approximately $130) per metric ton of carbon for every credit not submitted by the April 30 deadline. This penalty seems high considering carbon credits are currently trading on the European market around €4.25 ($5.52) per metric ton.

U.S. aircraft owners who do not perform any intra¬European flight missions escape, for the time being, the legal obligation to register with the EU-ETS, although that freedom may only be temporary. The EU originally intended to begin enforcing compliance on all operators conducting international flights to-and-from EU member states beginning in 2012, but the EU’s stance provoked a worldwide firestorm of controversy, including adoption by the U.S. Congress of the European Union Emissions Trading Scheme Prohibition Act of 2011. Faced with the threat of a boycott by airlines flying to Europe from China, India and the United States, the European Community announced it would defer enforcement of ETS as a “goodwill gesture” to allow nations time to reach agreement on a global framework for tackling aviation emissions.

Please contact Amanda Applegate at 877-237-5398 or aapplegate@aerlex.com.