EU ETS benchmarking for free allowances announced

Oct. 4, 2011 - PRLog -- The European Commission has released benchmarking values for the free allowances to be awarded to aircraft operators. With allowances trading at around €11-12 each and expected to rise over time, these free allowances will represent a significant monetary value for operators, especially airlines who operate with a high density. This information will allow operators who have claimed free allowances to estimate how many they will need to purchase for next year, and start budgeting for it.

Neil Duffy, Technical Manager for ICM ETS Limited which provides verification services for the aviation industry, explained to us:

“With 85% of the cap being given in the first year, and 82% after that, this means that for every 1,000 tonne-km carried out in 2010, operators will receive 0.6797 allowances in 2012, and 0.6422 each year from 2013 to 2020.

An operator’s business model will have a significant impact on the number of free allowances they receive. For example, if you take three different aircraft flying between London and Paris with a 75% load factor, a G5 will have to purchase 0.310 allowances per passenger, while a 737-800 would have to purchase 0.021 allowances per passenger and an ATR-72 would only have to purchase 0.0096 allowances per passenger. This shows how the scheme rewards operators who move payloads more efficiently.

It should be noted that it is 85% of the average annual emissions from 2004-2006, rather than 85% of aircraft operators’ needs which is being given away and as they have been awarded on the basis of tonne-km data for 2010, changes in the intervening years  may impact the number of allowances that will need to be purchased.

Although the EC has not released the full basis for their calculations, figures for passenger and cargo numbers and the average length of sectors for domestic, EEA and International flights have been published by the BATA and despite the recession the total tonne-km data for 2010 was 6.3% higher in 2010 than the average for 2004-2006.
(See: http://www.bata.uk.com/Web/Documents/data/current/WebAirl...)

These figures use average route lengths rather than reported data, but they are an interesting indicator and assuming growth in emissions is directly proportional to growth in Tonne-km over this period, this means that less than 85% of operator’s needs will actually be received. While on the surface this seems unfair, it should be remembered that the intention of the scheme is to control the growth of emissions from aircraft, and this system forces operators to consider how they can continue offering flights without increasing total emissions. The aviation industry is also just one of many industries in the EU which is covered by the scheme, and if there are not sufficient aviation allowances available, then operators can purchase allowances from static installations for compliance.

Allowances are given away for free to reduce the financial impact of the EU ETS on operators in the early years. They are also issued over a year before they have to be surrendered, so they can be sold and the capital invested in more efficient technology, which reduces the number of allowances which need to be re-purchased to cover compliance. In this way, the scheme can be used to fund emission reductions.

At present, anyone who is currently operating into the EU, but has not claimed their free allowances have missed their only chance to do so until 2020. Those who started operating after the end of 2010 are entitled to claim allowances in future years, and those who can demonstrate expansion of 18% annually over three years can claim extra allowances from a protected  3%, which has been set aside from the total allowances for such operators."  

Further information can be found on the European Commission Climate Action web pages. Visit http://ec.europa.eu/clima/news/articles/news_2011092601_e... for more details.

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ICM ETS Limited offers a verification service designed from the ground up for the aviation industry. As part of the ICM Group, which includes Martyn Fiddler Associates Limited (BBGA, EBAA, NBAA and BHA) and ICM Aviation Limited, we have been offering a wide range of services to aircraft owners and operators for many years, so we understand the operational and commercial issues of the industry. ICM ETS works in partnership with Future Perfect Limited, a company which has unrivalled experience within the EU ETS to deliver a verification service which satisfies both the needs of the aviation industry and the expectations of the regulators.

The ICM Group of companies has expertise in yachts and superyachts, aviation, company and trust services, accounting, VAT solutions and asset finance and banking solutions.