Green Aviation

Latest News:

Price Development

Key Events

Upcoming Events

Market Data

The European Union has indicated that it will be seeking more information concerning the recent statement from China’s Ministry of Finance concerning their introduction of an aviation surcharge and will consider whether it can qualify as a partial exemption under EU ETS rules. The EU ETS legislation already includes the possibility of a complete exemption of ETS charges for flights incoming to the EU if a non-EU nation implements “equivalent measures” to reduce carbon emissions from aviation.

EU Climate Commissioner Connie Hedegaard said “We have asked our delegation in Beijing to try to look a bit into what does it mean.” “What interests me is if that’s something that could be seen as an equivalent measure. In order to judge this we need more information about what it is.”

China’s Finance Ministry said last month that it will soon introduce a charge of RMB 20, approximately USD 3, and that the revenue may be earmarked for emission-reduction efforts.

The EU has repeatedly said that equivalent measures are the only option for countries outside the region to reduce the impact of the EU ETS.

The Institutional Investors Group on Climate Change (IIGCC) has called on EU states to raise carbon prices by reducing the supply of carbon allowances. The IIGCC members have EUR 7.5 trillion in total assets under management and urged EU nations to support the price of allowances after they reached record lows in April. IIGCC Executive Director Stephanie Pfeifer said “At under seven Euros per tonne, the carbon price is not even high enough to support a switch from coal to gas!”

Todd Stern, who is the US special envoy for climate change has cautioned that the disagreement over the EU ETS charging non-EU airlines for their emissions could potentially hold up global climate change talks. According to a report in the Financial Times he said after a recent meeting of climate representatives in Rome, “It could hold them up or have a spill over effect. He pointed out that the issue was mentioned several times at the meeting in a “uniformly negative” manner.

In addition to the US, more than 20 other countries including China, Russia and India and collectively referred to informally as the “coalition of the unwilling” have continued to oppose the EU’s decision to bring airlines in their emissions trading scheme and some have threatened retaliatory trade measures. However, not only US carriers, but also the Chinese authorities have added flight surcharges or departure taxes on EU flights at around the level of USD 3 per passenger per EU sector and which is a very rough approximation of the current cost of carbon on EU sectors from these countries.

Stern is the first US climate negotiator to indicate that the disagreement over EU ETS might potentially affect international talks on reducing greenhouse gases.

The EU’s climate commissioner, Connie Hedegaard, who represented the EU at the Rome meeting, has consistently said that the EU will not reverse its decision citing that the scheme is already law in the 27 EU countries and that the most senior court in the EU has ruled the scheme compatible with international law and open sky agreements. She has also highlighted that EU position was necessary due to slow progress at ICAO on reaching a comparable international agreement. Stern was reported by the FT that the countries opposing EU ETS feel that despite progress at ICAO proving to be difficult it did not necessarily mean that a multilateral approach should be disregarded. 

Qantas has announced that it will conduct a feasibility study into the potential for an Australian sustainable aviation fuel industry, backed by funding from the Australian Government. The Hon Martin Ferguson MP, Minister for Resources, Energy and Tourism, announced the government’s support for the study ahead of Australia’s first flight powered by sustainable aviation fuel, operated by Qantas from Sydney to Adelaide using a fuel type derived from recycled cooking oil. Qantas CEO Alan Joyce said the project would explore the conditions needed for the production of aviation biofuel from sustainable sources within Australia.

“Australia has the skills, resources and infrastructure to take a lead in this emerging sector, estimated could generate up to 12,000 jobs over the next 20 years. But there are also significant challenges – which is why we need to establish a clear plan. “Until sustainable aviation fuel is produced commercially at a price competitive with conventional jet fuel, we will not be able to realise its true benefits. This study aims to tell us how that can be achieved in Australia.”
Supplied by SkyNRG, the fuel type is a 50:50 blend of biofuel and conventional jet fuel certified for use in commercial aviation. Its ‘life cycle’ carbon footprint is around 60 per cent smaller than that of conventional jet fuel. Government funding for the study will be allocated under the Emerging Renewables Program, while Shell will provide technical support. The study will commence in May.

Prices of EUAAs which can only be submitted by aircraft operators have dropped further in relation to the more common EUAs in recent weeks. This means that compliance costs for airlines could be even lower than expected. Airlines can also utilise even cheaper CERs.
According to Vertis Environmental Finance the gap between EUAAs and EUAs is currently around 50c.

(Source, Bloomberg) http://bit.ly/IUnCyc
The EU’s ETS is compatible with World Trade Organization rules according to a study by University of Cambridge researcher Lorand Bartels, a senior lecturer in WTO and international law. “It’s a bit messy, but I think at the end of the day it’s justifiable,” he said in a phone interview with Bloomberg. “On most points it’s OK in that it’s justified on environmental grounds.” While extending the ETS to aviation might potentially violate WTO rules the WTO actually permits measures that are necessary “to protect human, animal or plant life or health.” A successful WTO complaint needs to demonstrate that the EU could have achieved the same goal using another means that is “both reasonably available and less trade-restrictive than the measure adopted. This is notoriously difficult to assess in the abstract,” Bartels wrote.

Qatar Airways CEO Akbar al-Baker has criticised the EU ETS as “a cover up for the inefficiencies of the European Union in the management of their finances.” He made the comments during an aerospace conference in Abu Dhabi on Monday 16th. Al-Baker said that fees raised through the ETS will especially penalise the rapidly growing Middle East airlines since they are expected to add hundreds of new planes to their fleets in the coming years. 

According to Reuters, China has today announced an RMB 20 ($3.18) charge on passengers on international flights. The revenues raised will go towards a number of initiatives, including reducing greenhouse gas emissions from the aviation sector. The move could impact the inclusion of Chinese airlines in the EU Emissions Trading Scheme. The Ministry of Finance said on its website it has raised the standard charge for passengers on international flights by China-registered airlines to 90 RMB from 70 RMB. At this moment it is not clear as to whether this charge extends to non-Chinese carriers, and if all international routes are included or not.

The EU have consistently said they can consider excluding airlines from countries that take comparable measures to cut emissions.

Price development

Carbon prices fell further last week. EUA finished the week at EUR 6.75, a loss of 14% in a week on week comparison. CER closed at EUR 3.95, 8 eurocents or 2% lower than 16 March. The reason behind the more moderate depreciation of the CER might be the compliance buying. The EUA Dec 12 finished at EUR 7.02 (-9.7% w/w) hitting a new local low at EUR 6.70 last Thursday. This is just 32 cents higher than the historical low hit 4 January 2012 at EUR 6.38.

Key Events

A – EP supports low carbon roadmap
B – Poland vetoes stricter CO2 rules
C – ITRE approves set aside
D – EUA-CER spread reaches EUR 4.31
E – EIB sold 23.5m EUAs in February
F – CER hits all time low at EUR 3.47

Upcoming Events

27 March – German auction of 300,000 EUAs (spot)
28 March – German auction of 645,000 EUAs (futures)
31 March – Submission of 2011 verified emissions

OECD forecasts 50% increase in GHGs

The OECD has said that global greenhouse gas emissions could rise 50 percent by 2050. It urges more ambition: a global carbon market, transformation of the energy sector to low-carbon and scrapping fossil fuel subsidies.  The report recommends linking national and regional emissions trading programs to create a single global carbon price.

SocGen expects EUA Dec 12 to reach EUR 11

Société Générale has forecast that the EUA Dec 12 price would reach EUR 11 by the end of 2012. The forecast is one euro higher than the last forecast made in January. It is based on the increased probability of the EU set-aside.

UK levies a carbon tax of £4.95

From 2013 the UK will impose a carbon tax of £4.95 per metric ton of CO2 emissions on utilities in order to raise revenue and encourage investment in nuclear and renewable generation. From 2014 the tax will increase to £9.55.

Question of the week:

I heard that there will be a change in the current system of registries already this year. How will this affect my units and transactions?

During 2012, the old system of national registries will be replaced with a single Union Registry. Following this transition, all accounts will be held on this one registry system. The CITL will be replaced by the EU Transaction Log which will check, record, and authorise all transactions that take place between accounts in the registry. This verification will ensure that any transfer of allowances from one account to another is consistent with the ETS rules. Although there will be just one registry, administrative matters will be handled by the authorities of individual member states.

The Union Registry was activated in January 2012 for aircraft operators only. The new accounts are only able to receive the free allocation of EUAAs. Until later in 2012, when the Union Registry becomes fully functional, accounts will not be fully operational and it will not be possible to transfer units to or from these accounts. However, article 15(4) of the registries regulations suggests that accounts can be unblocked earlier than this the operator asks the national administrator.

According to the Chairman of German utility company EON AG the EU needs to up its ambitions and create a greater incentive for companies to invest in green technologies by introducing a carbon reduction of target of 50% by 2030 versus 1990. It already has adopted a target of a 20% reduction by 2020 and achieved 17% already. “Without reform, the market will stagnate”, according to Johannes Teyssen.

The EU believes there is a “window of opportunity” for nations to reach a global deal on emissions over the next year according to Joao Vale de Almeida who is the EU ambassador to the US. “We remain fully committed to an international deal,” said Almeida. “Things have started again in the ICAO because there is the regulation in Europe, and we are happy about that.” He reiterated that the EU will not rescind its scheme, “We cannot suspend legislation like that, as you well know.” “It’s been agreed democratically” he said.

Speaking at last week’s annual ATAG/IATA Environment Summit in Geneva the Chief Executive of Airbus Thomas Enders urged the EU to defer the implementation of ETS charging part of the scheme due 30 April 2013. He said that going ahead would risk thousands of jobs in Europe due to cancellation of orders by China and said “Delay it, freeze it for one or two years”. Upon closer examination Enders was not explicit that orders had actually been cancelled. Our own assessment is that there has been no such cancellation from the Chinese authorities or airlines; indeed, it was recently reported that Chinese airlines were in fact being allowed to buy whichever aircraft they wish.

India which is a member of the 23 countries opposed to the EU ETS knick-named as the “coalition of the unwilling” has racked up the pressure on the EU ETS. Last week the Indian minister for Civil Aviation commented in a parliamentary session that “the imposition of carbon tax does not arise“ and added that “though the European Union has directed Indian carriers to submit emission details of their aircraft by 31 March 2012, no Indian carrier is submitting them in view of the position of the government”.

In our opinion it’s one thing for a government to have such a view, but it’s an entirely different matter for an international business such as an airline needing to comply with local laws and regulations wherever it operates. Given that the EU ETS is already incorporated in the national laws of 27 EU countries for perhaps as long as almost 3 years now, it is difficult to see the EU group rescinding the laws and treating aviation as a “special case” exemption.

It’s important to remember that recently there were rumours of an Indian ETS and that European airlines are now required to submit fuel consumption data to the authorities. It may be tempting to jump to the wrong conclusions, but it’s not unreasonable to speculate that one year from now the EU might have deemed India to have adopted “equivalent measures” and therefore fully or partially exempting carriers from the EU ETS charges on the inbound India to EU sectors.

Deutsche Banks AG forecast that the EU carbon market will have an allowance surplus of 1 billion tons by 2020.  The bank cut its forecast to a range from EUR 5 to 7 during the second quarter of 2012 according to an analyst Mark Lewis in Paris.

UBS have re-iterated a forecast earlier this year that EU carbon prices could fall to a low of 3 euros if the EU will not change the scheme’s rules and cut supply of carbon permits said UBS AG. “We expect the carbon price to collapse, to accelerate from here,” said Per Lekander, a UBS analyst based in Paris. “Potential sellers have held off selling ahead of the yearly emissions data. The sales pressure is now likely to accelerate. We believe that it will become increasingly clear over the next months that the emissions trading system rules won’t change and with this we see 3 Euros a ton as a likely price floor.”

According to a report by the Shanghai Daily, Air China has neither cut nor cancelled Airbus orders, despite numerous reports from Reuters and other Western news agencies over the past few weeks. Air China is sticking to the delivery plan for the aircraft ordered, according to a top official of China’s flag carrier.  “The stand of the central government is consistent, that is to oppose firmly the EU’s unilateral move to impose a carbon tax,” said Wang Changshun, Chairman of Air China. “The attitude of Air China is the same as our government’s.” Wang said he had not received any formal notice about any cancellation of the Airbus orders. Board secretary Rao Xinyu said the airline will stick to its plan to take delivery of 35 new aircraft this year, including 14 A320/A310 and six A330 from Airbus.

According to the Xinhua News Agency, an unnamed source has advised that the Chinese authorities have completed plans for a pilot Emission Trading project and which is expected to be implemented as formal programme during 2013. There is no specific detail as to whether aviation would be included. 

According to a report on Bloomberg, the EU’s Climate Commissioner Connie Hedegaard last week met with the US Transportation Secretary Ray LaHood. “The impression I got is that there is genuine will to try and see if we can agree to something,” Hedegaard said in relation to agreeing to a global deal on aviation emissions reductions. 

United, American Airlines, and their trade association, Airlines for America, have dropped their legal challenge to the EU’s ETS. The airlines gave no explanation for abruptly dropping the case in the UK, but their attorneys may have realised their efforts could be null and void given the strength of the 21st December ruling from the European Court of Justice which upheld the EU directive as consistent with international law.

After pursuing the case for more than two years and losing in the European court, the airlines filed papers asking permission to add new claims just before the case was scheduled to close. The UK High Court had planned to hear their request, but on March 27 the airlines withdrew their appeal.

It now seems that their focus will switch onto political pressure and requesting the Obama Administration to bring a challenge under ICAO’s Article 84 procedure based on similar arguments the airlines intended to use in the London court; arguably a puzzling tactic to adopt. These industry representatives are also pressing the US Congress to prohibit US carriers from participating in the EU law. The ICAO Secretary General has already signalled that an Article 84 challenge would slow the organization’s momentum toward a new agreement. 

The Deputy CEO of Russia’s biggest carrier Aeroflot, which opposes the EU ETS along with 22 other carriers in the knick-named “coalition of the unwilling” has said that the EU’s move to include it in the scheme may cost the carrier 800 million euros in the period to 2025. According to Deputy CEO Igor Chalik “The quotas will be sold on the exchange, so the price will be higher”. For us it’s not immediately clear as to why Aeroflot chose the period to 2025, neither which carbon price they assumed.

Airbus and eight European airlines have urged the EU to compromise on aviation’s inclusion in the ETS after China apparently stalled a further 10 A330 orders, now totalling 55 Airbus aircraft (10 A380 and 45 A330) worth up to $14 billion.

As we mentioned last week, there is a big game of brinksmanship taking place. Amidst all of these rumours, official statements and then counter-statements, the EU already has a mechanism in place to take into consideration other emission reduction initiatives from other States, or indeed a global scheme under ICAO. The EU is unlikely to bow to external pressures with the only concessions allowed under the law of exempting inbound-EU sectors from the EU ETS in the case of “equivalence”. Time will tell as to what happens, but an analyst at Green Aviation Solutions predicts that at some point in 2013 all airlines flying sectors from China to the EU will be exempted from paying for carbon permits on the inbound EU sector. It could then be logical to assume that a similar situation may arise in respect of flights from Russia, India and the USA, with a domino effect on other inbound EU routes as well, possibly.

In a rare sign of support for the EU ETS from the US, a group of leading Economists including 5 Nobel laureates urged the President to support the scheme as a first step to placing a price on carbon to help avoid catastrophic outcomes of climate change. “We implore you to support the European Union’s innovative efforts to place a price on carbon from aviation through the emissions trading system (EU ETS), or, at the very least, to stop actively opposing these efforts” they wrote to him in their letter. It will be fascinating to see how this plays out over the coming months.

Last week’s “World Biofuels Markets” to which Green Aviation was a media partner saw its largest ever attendance from the aviation sector. This annual conference and exhibition covers all transportation sectors and traditionally Aviation has occupied a small side room for half a day. This year Aviation was given a two day schedule and attendance was varied but we estimate peaked at more than a hundred people. We’ll produce a fuller write up in due course but in summary it was very encouraging to see further new technologies, methods and projects being proposed, especially to produce sustainable biofuels from non-feedstock sources such as Jatropha, algae and various wastes.

One of the most ambitious projects remains the initiative between British Airways and Solena to produce a waste-to-biofuels plant in East London, or nearby, with several potential sites identified in the area. BA expects planning permission to be granted and for work to start in 2013 with an 18 month build completion timescale. The investment will be $350 million and initially produce enough fuel per day to fill 80 tanker trucks. This represents around 2% of BA’s fuel needs in the London area and this initial batch will be used exclusively at the nearby London City airport. Despite the huge investment the business case is made on the existence of the waste used avoiding a $100 per tonne landfill tax.

Elsewhere a Dutch company SkyNRG is supplying several airlines’ trials of biofuel flights with waste oils from catering use and then converted to biofuel. Lufthansa has a partnership with Finnish company Neste and is using a 50% biofuel / kerosene mix on all flights of one dedicated A320 aircraft between Frankfurt and Hamburg for several months, with no adverse events and no apparent differences in engine performance or exhaust deposits.

All this increased activity, and more, bodes very well for the future of sustainable biofuels in aviation, but the crux of the matter is the same for all airlines – how to get sufficient quantities of biofuel and at the right price? Given the technical approval (ASTM D7566) of the 50% biofuel / kerosene mix last year there has certainly been a noticeable increase in interest and investment, and a forecast in the UK Sustainable Aviation Roadmap that by 2050 sustainable biofuels will contribute an 18% reduction in aviation emissions. Personally I am more optimistic as more projects and investments come on-stream it could lead to a snowball effect. Additionally, not only can airlines adopt biofuels to mitigate the EU ETS and other such emissions capping schemes in the future, but I suggest it is increasingly important to develop a strategy of weaning off fossil fuels as an energy security policy and to gain a better price predictability and stability to offer a significant competitive advantage; one major US carrier has adopted exactly such an approach.

Price Development

EUA prices started a sharp decline after the ITRE vote on February 28 as market participants expecting a bigger price appreciation started to realise profits. EUA Dec 12 hit a new local low at EUR 7.82 on 9 March, a level not seen since 14 Februaryy. Spot CER could not recuperate either falling to a new local low at EUR 4.1 on 12 March. Trading volumes were subdued during the whole period. Both price movements and trading volumes might remain in a tight range for the near future.

Key Events
A – Bearish mood after bids for UK auction of 3.5mn EUAs were lowest since October 2009
B – Heavy selling after the ITRE vote
C – DECC started to allocate free EUAAs
D – Three-month low in CER issuance in February
E – EIB sold 21.5mn post-2012 carbon permits in January
F – CER hits all time low

Upcoming Events
13 March – German auction of 300,000 EUAs (spot)
14 March – German auction of 645,000 EUAs (futures)

EU Climate Commissioner Connie Hedegaard has stated that said that the EU intends to propose further measures to cut greenhouse gases despite
Poland’s “veto” of a declaration on reducing emissions across the EU. Poland was the only country to block the initiative but it is not the first time that it has blocked environmental initiatives. Poland relies on coal for 90% of its electricity generation and so is highly susceptible to such changes and which can cost it disproportionately. Poland may be taking a negotiating stance trying to win concessions as it has on previous occasions. The EU is trying to boost CO2 prices which have fallen significantly in the past year.

A recurring theme over the past months has been the implicit threat to European business interests in China as a tactic to support their objections to their carriers being covered by the EU ETS. There have been plenty of rumours, even announcements, but which were then hurriedly rescinded.

In the past few days the waters seem to have muddied with seemingly contradictory announcements from the Chinese on one side, and an alliance of Airbus and major European airlines on the other side. The latter have become concerned over threats of Chinese reprisals against their businesses and yesterday Bloomberg reported that Europe’s leading airlines and Airbus have jointly written to the governments in France, Germany, Spain and the UK asking to “pull back” on the EU ETS scheme to avoid potentially serious consequences for the aviation industry.

This plea follows a surprisingly conciliatory announcement last week from the Civil Aviation Administration of China which said that is has not forbidden their airlines from purchasing Airbus planes – and just a couple of days after Airbus’ owner made a comment stating China may refuse to accept planes from Airbus in protest at the carbon emissions tax! Confused?! A spokesperson from the CAA said “The purchase of airplanes is a business activity by airlines, in which the government doesn’t intervene.” “The government respects the companies’ choices, which are made based on their own needs.”

All that airlines can expect is that the uncertainty is likely to continue and we suggest that they should plan their carbon purchases accordingly with specialist advise.

“AC2012” had more than 320 registered attendees from more than 60 countries and from at least 112 distinct airlines / operators! We believe that this may make it the largest aviation event of its kind anywhere in the world during the past year, and coincidentally even exceeding the last IATA / ATAG Environment Summit!

The feedback was overwhelmingly good / excellent, but there were also some very helpful comments that will enable the ACE team to learn and improve for next year, especially the streaming of different ability levels and having different workshops for different sectors and different strategies. The scope may possibly also extend to cover other ETS topics such as IT solutions, biofuels and fuel management.

If you have any particular suggestions please do not hesitate to email Andrew Pozniak at andrew.pozniak@greenaviation.aero

AirAsiaX the Malaysian low cost longhaul carrier has announced that it will stop flying to London and Paris at the end of March due to the introduction of the EU ETS. They also blamed fuel costs and the economic slowdown as reasons.

They will also stop flights to India. In contrast they intend to boost services to Australasia, China and northeast Asia to focus on more profitable markets for them.

According to the Austrian emissions trading registry the “trading of allowances will be possible from the full activation of the Union Registry” i.e. when it is fully operational, and which is expected to happen in June 2012. By that date the transfer of national registries to the EU registry will have taken place, if all goes according to plan, as “always” with the ETS…

Ryanair will introduce a 25c ETS charge on every seat from Tues 17th January to cover their estimated €15m - €20m ETS bill for 2012. From our calculations this is about the right amount to cover their incremental carbon permit costs, as an average across their network. This announcement follows similar moves earlier this month by several US carriers including Delta who will charge a levy of USD 3 per passenger, which according to our estimates is perhaps a little higher than their incremental costs and which may be intended to recover additional EU ETS costs incurred.

According to Bloomberg reports on 17 January the EU’s transport and climate commissionaires have responded to Hilary Clinton’s request to exempt US airlines from the EU ETS by writing to her that “We see the inclusion of aviation in the EU ETS as an important contribution to, and a catalyst, towards global action, rather than an obstacle.” “We believe there’s now a growing recognition of the need to move forwards in ICAO to develop a global solution and we hope that the U.S. shares our view that we must seize this opportunity.”

The EU adds that it is willing to discuss exempting incoming flights from the US if they are willing to introduce equivalent measures to reduce airline emissions. They further re-iterated that EU law could be amended if and when there is a worldwide ICAO agreement on airline emissions.

A global airline ETS under the auspices of ICAO might not be created until 2018 according to a German parliament newsletter. Because ICAO has not yet even drafted a proposal for an airline ETS the German’s believe that they are unlikely to have one ready in time for the next ICAO general meeting in 2013, and which could mean that it would be left until the following meeting in 2016.

Whichever meeting actually backs such the ETS proposal it is likely to take a further two years to prepare and implement. However, ICAO has previously said in November 2011 that it aimed to have a proposal in place by then end of 2012, so either the Germans are being very pessimistic or ICAO is being overly optimistic.

Several major airlines are already taking advantage of low carbon permit prices despite recent outcries from the airline industry against the EU ETS, helping to increase demand in a market which has seen prices tumble by up to 60% in the past year. According to an article published by Reuters, Lufthansa are “continuously buying allowances”. The airline is expected to have received 65% of its allowances free of charge hence needing to buy the remaining 35% in the marketplace, which could be a cost impact of EUR 130 million on the airline although it is anticipated it will be passed on their customers.

At least one Exchange is taking notice of the increased interest from airlines. Slovakia’s Commodity Exchange Bratislava is the first to announce that it will commence trading in EU Aviation Allowances by the end of February 2012. This contrasts with the negative sentiment from several exchanges last year who said they had no plans at the time to offer EUAA trading facilities due to the costs of setting up a new process outweighing the benefits, thereby leaving the trading to “over the counter” and carbon traders. Perhaps they may now change their minds after Bratislava has set the lead.

According to Steve Ridgway the CEO of Virgin Atlantic carbon trading will develop into a routine as common as fuel hedging for airlines. Virgin will get 3.6 million EUAAs in 2012 against its estimated emissions of 4.5 million tonnes.
A spokesperson for Air France-KLM estimates they will need 7 million CO2 permits in 2012 which they reckon will cost them between EUR 50 to 100 million.

The total demand from the airline sector by 2020 could reach 700 tonnes per annum according Thomson Reuters Point Carbon, thereby making this sector the second largest buyer in the EU ETS after the electricity sector.

Finally the European Court of Justice has announced its long-awaited ruling in relation to the legal action initiated by the US and Canadian airlines and associations against the EU ETS.  In its judgment delivered today, 21 Dec, the judges at the European Court of Justice confirmed the validity of the EU ETS directive that includes aviation activities in the emissions trading scheme.

The Court’s first point was that it established that the EU is not bound by the Chicago Convention because it is not a party to that convention. Its second point relating to the Kyoto Protocol, the Court observed that the parties to the protocol may pursue limitation or reduction of emissions from aviation fuels outside of ICAO.

The Court then examined whether the EU ETS directive is compatible with the principles of customary international law and the Open Skies Agreement. It judged that the EU ETS is not intended to apply to aircraft flying over the high seas or over the territory of the Member States of the EU or of third States and it is only if the operators of such aircraft choose to operate a commercial air route arriving at, or departing from, an airport situated in the EU that they are subject to the EU ETS.

In relation to the operator of an aircraft being required to surrender emission allowances calculated on the basis of the whole of the flight, the Court pointed out that EU legislature may permit air transport to be carried out in its territory only on condition that operators comply with the criteria that have been established by the EU.

Finally, the Court responded to the claim that the EU ETS constitutes a tax, fee or charge on fuel in breach of the Open Skies Agreement. It ruled that the EU ETS does not infringe the obligation to exempt fuel from taxes, duties, fees and charges and that the actual cost for the operator depends, because it is a market-based measure, not directly on the number of allowances that must be surrendered, but on the number of allowances initially allocated to the operator and their market price when the purchase of additional allowances proves necessary in order to cover emissions.

The Court added that it cannot even be ruled out that an aircraft operator, despite having held or consumed fuel, will bear no pecuniary burden resulting from its participation in the emissions trading scheme, or will even make a profit by assigning its surplus allowances for consideration.

The Court concluded by stating that the uniform application of the scheme to all flights which depart from or arrive at a European airport is consistent with the provisions of the Open Skies Agreement designed to prohibit discriminatory treatment between American and European operators.

The full judgement is available at this shortened link:  http://bit.ly/sMqkBV
The shortened press release is available at this shortened link:  http://bit.ly/sXJMDx

So what does this mean for airlines?

In our view it means that nothing changes, the airlines should keep on complying with EU ETS as they have done so far until such a time that there lawyers may ever advise them not to do so. The EU have already stated that they are negotiating the possibility of agreeing “equivalent measures” with several non-EU States and if they should come to an agreement that might have a bearing on the inbound EU sector with those nations, but not on the ex-EU or intra-EU sectors.

The US Department of Transportation (DOT) issued an order on Monday 19th Dec to nine European carriers to submit ETS related information by 31 January 2012.  The orders do not specify what they will use the data for but it is believed by some observers that the data will help the DOT to potentially define retaliatory measures on EU airlines flying to the US. Others believe that this may be related to discussions concerning EU ETS equivalent measures.

The order was served upon Aer Lingus, Air France, Alitalia, British Airways, Deutsche Lufthansa, Iberia, KLM, SAS and Virgin Atlantic. 

The data that the DOT requires is –
DATA and REPORTING DATE:

1) Free 2012 allowances allocated
January 31, 2012

2) Free 2012 allowances received, if different from 1) (If not different, so advise.)
March 31, 2012

3) 2010 revenue tonne kilometers reported to administering state
January 31, 2012

4) 2010 revenue tonne kilometers operated on flights between U.S. points and points in the EU, Norway, Iceland, and Liechtenstein
January 31, 2012

It should be noted that similar data has also been requested of seven US airlines, however financial data is additionally requested. The airlines affected are American Airlines, Continental, Delta, Fedex, United, UPS, and US Airways. The data that the DOT requires is –

DATA and REPORTING DATE

1) Free 2012 allowances allocated
January 31, 2012

2) Free 2012 allowances received, if different from 1) (If not different, so advise)
March 31, 2012

3) Estimate of allowances needed for 2012 operations covered by ETS April 15, 2012

4) 2012 CO2 emissions reported to administering state
March 31, 2013

5) Monetary amount paid to administering state in ETS allowance auctions
15 days after the close of each auction

6) Monetary amounts spent and/or received in ETS allowance markets
Within 15 days after each such event.

If I were an ETS Manager for an airline not currently impacted by this request I would nevertheless start working with my analyst, or IT department, or external supplier to be able to provide this kind of data accurately and quickly in case the US extends the requirement, or other Nations especially Canada, China and Russia decide to follow the US DOT example.

After seeing carbon prices plunge this year due to investor worries about the Eurozone and the over-supply of carbon allowances into the ETS, and carbon prices which bottomed out at a low of EUR 6.30 last Wednesday, prices experience an unprecedented record jump this Tuesday after the EU parliament’s environment committee backed a proposal that would require the EU executive to cut the supply of allowances. Allowances for December 2012 closed 21 per cent higher on the day, but reached a peak at 32 per cent to EUR 9.75 during trading on the ICE Futures Exchange. In context, prices have now dropped approximately 39 percent year to date.

According to an article on Bloomberg the Australian Prime Minister Julia Gillard is in talks with the EU and New Zealand with a view to linking up their markets for emissions capping and trading. She also highlighted that they will be reaching out to other nations.

She made the comments on the day after Australia passed a law that will require around 500 of their biggest companies to pay for their carbon emissions for the first time. The emitters will have an option of offsetting up to 50% of their emissions via carbon emission reduction projects in developing countries. The remainder will need to be purchased at A$23 per tonne (approx. €17 today) from July 2012. This compares to the current price of EUAs around €10 per tonne CO2.

The news comes ahead of the meeting of 191 nations in South Africa for 2 weeks commencing 28th November 2011 concerning climate negotiations. The talks are planned to try and come to some form of agreement on a post-Kyoto global agreement. However, progress has been painfully slow in the past 2 years due to particularly major differences between the big players such as China and the US. 

Although the US doesn’t yet have a nationwide ETS emissions trading system the state of California is nevertheless introducing an ETS in 2013. Gillard said about that “We don’t underestimate the impact of American states making a decision to move to carbon pricing.”

The International Energy Agency (IEA) has estimated that by Nations delaying the follow-up agremeent to the soon to be expiring Kyoto agreement will be a significant false economy. The IEA’s ”World Energy Outlook” report stated that “for every $1 of investment avoided before 2020 an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions”. “Delaying action until 2015 would call for early retirement or retrofitting of plants emitting 5.7 billion tons of carbon dioxide in 2035, around 45% of the global installed fossil-fuel capacity.” This is in the context that because power stations and other installations typically have lives in excess of 25 years and 80% of emissions would be “locked in” and largely unchangeable, leaving policy makers little room for manoeuvre.

Last week the Bill to “To prohibit operators of civil aircraft of the United States from participating in the European Union’s emissions trading scheme, and for other purposes“ was supported by the House of Representatives. The next planned steps are to take the Bill to a vote in the Senate, but it is not clear when this will happen. If it is passed by the Senate then it still would need to be approved by the President and it is doubtful in many quarters as to whether Obama would actually support such a Bill which has an explicit intention of preventing US companies of complying with the laws of allies.
How will the EU respond? So far it has insisted that nothing will change but that discussions are underway concerning “equivalent measures” which could take into account aviation carbon reduction measures being implemented in other States and in some way reflecting that within the EU ETS. What does that mean in practice?
We think that the EU ETS will probably remain unaffected in terms of its structure but for inbound EU sectors there may be an adjustment / recognition in the form of a greater number of free allowances or in the case of “full equivalence” the inbound EU sector could in effect be exempted completely. However it is most unlikely that the EU will compromise the integrity of their own ETS by exempting completely any participant or country from the scheme.
At this point in time we would suggest to all aircraft operators based in those countries where there is a dispute with the EU that they should nevertheless strongly consider to continue to plan for the ETS to apply on all their ex-EU and intra-EU sectors, at the very least.

The EU’s Climate Commissioner Connie Hedegaard is very confident that the US will allow its carriers to comply with the EU legislation on EU ETS. She pointed out that “the EU respects US legislation and US lawmakers’ authority in US airports” and that “if the US wants to handle emissions from aviation differently, that is fine; our legislation clearly envisages that if a country outside the EU takes ‘equivalent measures’ to address aviation emissions then all incoming flights can be exempted from the EU system.”

According to Bloomberg / New Energy Finance the global airline industry could stop losing money due the need to buy EU ETS carbon permits in 2014 as air fares are expected to rise to more than cover actual costs. “The aviation industry should start to break even under the EU emissions trading system by about 2014, as its ability to increase fares exceeds its cost of paid-for carbon allowances,” according to Guy Turner, Director for commodity market research at London- based New Energy Finance, said Wednesday 26 Oct.

On the 6th October the Advocate General stated her opinion that the inclusion of international aviation within the EU ETS is compatible under international law. She was quoted as stating “EU legislation does not infringe the sovereignty of other States or the freedom of the high seas guaranteed under international law, and is compatible with the relevant international agreements“. The ECJ is expected to make a final ruling in early 2012 but based on historical cases it is expected to a degree of certainty of 80-90% to agree with the AG’s opinion, but only time will tell.
What does this mean for non-US nations? We are of the opinion that had there been any indication that international law may have been breached then several other nations may have also raised legal action and / or continued their resistance to the EU ETS. Whilst in public China and Russia and others may continue to make other arguments against the EU ETS we feel that it is now less likely, although not impossible, that the EU ETS will not apply to their aircraft operators and that those operators will continue to comply as they have done already since their preparations for EU ETS started in 2009.
In the event that an operator purchases carbon permits but then requires less of them, or is exempted from the EU ETS for legal or political reasons in the future, then they should be able to monetize those allowances by selling them into the carbon exchanges or a broker, especially if the EU decides to seriously take action in 2013 to lift the carbon permit prices to a minimum level of EUR 30 (see news in “Carbon Market News Briefs” on page 5 of this newsletter).

In a surprising move last week the European Low Fares Airline Association have publicly stated their support of the EU ETS. Secretary-General John Hanlon was speaking at the World Route Development Forum in Berlin and said the EU ETS was “not perfect” but that it is an environmentally effective mechanism to deal with aviation’s impact on climate change and better for airlines and consumers than government taxes. He made a point that everyone is keen on a global ETS solution under ICAO but that it is not yet available and threw ELFAAs support behind the EU ETS, “We totally support the EU’s conclusion that it is the most effective way of accounting for the cost to the environment with minimal cost to customers.” He believes that ETS is a better solution than taxes because the airline industry “can still grow by buying allowances” and “ETS has a cost but it is much better for the consumer”.

According to IATA Director General Antony Tyler airlines will try to recover the cost of the carbon permits which they will need to purchase over and above their free allowances. He said that it is naive to think they will be successful however, due to the highly competitive pricing environment. However our own view is that since ETS is likely to cost an airline a premium on its fuel bill in the range of 5-10% over the life of the ETS and that the average airline profit margin according to IATA is a mere 1.5% then that leaves little, if any, option but to pass on the majority of their carbon costs in higher fares.

According to Bloomberg the airline Virgin Atlantic is planning to fuel their jets from Shanghai and Delhi to London from waste gases from steel mills turned into alternative jet fuel. LanzaTech NZ Ltd will make the fuel using technology by Swedish Biofuels AB, according to Virgin. The flights are expected to start in 2-3 years and LanzaTech will be building fuel plants in China and India. The new fuel is undergoing tests in New Zealand and a larger demo facility will be completed in Shanghai by the end of this year. According to Richard Branson chief of Virgin “This new technology is scalable, sustainable and can be commercially produced at a cost comparable to conventional jet fuel. With the steel industry alone able to deliver over 15 billion gallons of jet fuel annually, the potential is very exciting.”

In respect of the political pressures and legal actions being raised against the EU and Member States concerning the EU ETS, Climate Action Commissioner Connie Hedegaard has been quoted today:

“As much as the EU prefers global action, we can’t defend that the aviation sector is exempted from contributing because they can’t agree internationally. This is why the EU decided to take this step forward in 2008 while we will continue to fight for global regulation of aviation like at the next UN climate negotiations in Durban“. “For many, many years we, more than anyone, fought hard to get an international agreement on aviation; unfortunately without success,” “We’re already asking contributions from our power sector, from other industries, so we think that while we’re expanding the system in Europe it’s not logical that some of the big sectors where emissions are growing should be exempted.” “There’s a lot of informal dialogues with lots of different countries,” said Hedegaard said. “The reason for these equivalent measures was to try to inspire all these countries to discuss what are you doing with your aviation industry, but we’d very much like to have aviation as part of the outcome from the United Nations climate talks in Durban.”

We will see as to what actually evolves and happens on this front. On 8th September a US Bill to “To prohibit operators of civil aircraft of the United States from participating in the European Union’s emissions trading scheme, and for other purposes“ was approved to move forwards from the transport committee to a vote in the whole of the House of Representatives at some point in the future.
Separately, the European Court of Justice is expected to provide a preliminary opinion on 6th October 2011 concerning the legal action taken by US carriers against their inclusion in the EU ETS. Whichever way the opinion goes will, in our humble opinion, lay down a clear marker for how non-EU States / airlines will continue to cooperate, or not, with the EU ETS starting 1 January 2012.

The European low cost airline Air Berlin has made the first ever trade in EU aviation allowances (EUAAs) with the German bank Commerzbank, according to the two firms on Monday. According to Reuters the units that were traded were EUAA futures for December 2012 delivery and the quantity was “substantial”.
Although EUAAs do not yet exist, Air Berlin and Commerzbank nevertheless structured some kind of futures agreement between them and which was related to a benchmark of the EUA price.
No price details of the deal have been revealed but December 2012 EUAs are currently trading (Monday 26th) on the European exchanges and with brokers such as Climate Corporation at around the EUR 11.50 level. It is speculated by some traders that when EUAAs are available they likely to be priced a few cents or few tens of cents lower than standard EUAs because they can only be used by airlines and not the other 90% of EU ETS participants. This could make EUAAs less liquid and generally less tradable and therefore discounted in price.
It is important to note that airlines can also purchase EUAs and CERs and are not actually required to purchase any EUAAs whatsoever. The free carbon allowances that they will receive in their registry account in February 2012 will be EUAAs which need to be submitted in March / April 2013 shortly after their verified 2012 emissions reports are submitted. These free allowances will need to be accompanied with purchased EUAs and / or CERs to cover the verified emissions totals.
Because of the 1 year gap between receipt of free allowances and the need to submit them some operators may even adopt a strategy of selling their free EUAAs if they consider the price to be favourable or if they need the cash generated from their sale for other purposes. This may possibly be one of the motivations for the Air Berlin / Commerzbank deal. However they will need to buy back the equivalent number of carbon permits (EUAs, CERs, EUAAs) no later than April 2013.

Trade associations representing Europe’s network and regional carriers have recently called on the European Commission to promptly address the growing international pressure for the EU Emissions Trading Scheme (EU ETS) to drop the inclusion of airlines from outside Europe, particularly pressure from the United States which includes a court case as well as a legislative Bill.
The Association of European Airlines said that with just five months before the start there was now considerable uncertainty on the scheme’s future. In the face of a threatened international withdrawal, the European Regions Airline Association said the scheme must apply to all airlines, regardless of origin, or none.

Following the introduction of the proposed legislative Bill in the US House of Representatives which if passed would forbid US airlines to participate in the EU ETS, a hearing of the House Aviation Subcommittee took place on July 27 but as of yet there is no conclusion. China and Russia are considering taking actions of their own, including the possibility of bringing a joint formal complaint at ICAO against EU states over the inclusion of their airlines into the ETS. However such action is very rare and the process can take many years. Our guess is that this complaint, if it actually happens, will therefore be used a political tool to gain concessions for their airlines.

However, many lawyers believe that the EU courts are most unlikely to overturn an EU law (and especially as the door was already open to all nations to negotiate), and that most likely the scheme will continue unaffected possibly with some further concessions of additional allowances or only ex-EU sectors. In one possible scenario airlines could face conflicting legal obligations - EU law would require airlines to pay fees, but US law could prevent them from paying them – forcing a standoff.

According to an article by Pointcarbon carbon brokers rather than Europe’s Exchanges are expected to dominate in the initial stages of trading in EUAAs (EU Aviation Allowances). The Exchanges have apparently said that that they have no immediate plans to launch contracts for the aviation sector.

Editor: What does this mean for airlines? Is it a major issue or not?  Well the rules are that brokers are indeed able to trade on behalf of all clients and between their clients and can do so “over the counter” (OTC) between interested parties and without an Exchange. An Exchange is created or involved when there is sufficient market interest in a particular allowance. It seems that at least initially there is no anticipation of significant volumes of EUAA changing between parties and so the Exchanges who support larger volumes will not get involved since the benefits of doing so will be lower than the costs. For brokers the equation and incentives are different. For example Climate Corporation is a long-time member of the biggest European spot exchange for EUAs and CERs (Bluenext) but it also offers its own OTC (trading platform - the Carbon Pool Europe – in addition. Climate Corporation are able to guarantee to offer the real time prices on the market and will always be able to buy/sell EUAs/CERs at a client’s designated price level. Should you require any further information, please don’t hesitate to contact us on via the contact form of this site.

Source Reuters: “The European Union is not considering changing its law obliging airlines flying to Europe to buy carbon emissions permits, European Commission President Jose Manuel Barroso said on Wednesday 8 June. “The inclusion of aviation in the ETS is not a proposal, it is now European law. It was approved unanimously by the member states of the European Union, and it was adopted ... with a very strong backing by the European Parliament. So we are not thinking at all about the possibility of changing our legislation,” Barroso told a news conference”. Barroso reiterated the EU’s willingness to discuss the measures - “The goal is to reduce emissions,” he said. “All the world should unite in some kind of directive like this one.”

Sources, various: “IATA stated last week that it had not retreated from its support for emissions trading but said the EU’s scheme for aviation was unfair and costly. “IATA’s position is very clear. We see emissions trading as a useful tool and we’ve not backed away from that at all,” said Paul Steele, Director, Aviation Environment, for the International Air Transport Association and ATAG, Air Transport Action Group.  “The issue about the EU ETS is not about the ETS as a mechanism, it’s about the fact that the EU has probably over extended itself in the way it’s trying to impose it,” he told reporters. He continued “Our concern from an industry point for view is there doesn’t seem to be any accountability mechanism to sign off on what an equivalent measure is, apart from what the Commission decides it is”.  “It’s one of the biggest concerns we have right now, that we’ll end up with an even greater patch-work of measures.”

New report tracks aviation biofuels collaboration
Source: ATAG

25/03/2011

The Air Transport Action Group (ATAG) has released a new report, Powering the Future of Flight, which tracks progress in some key aviation biofuels projects worldwide and provides policymakers with a few examples of how they can help the deployment of biojet fuel.
The publication looks at four case studies in detail – the collaboration occurring in the United States, the Mexican Government’s work to develop aviation biofuels, a project in the United Kingdom to turn household waste into aviation biofuel and a collaboration between the aviation sector and research institutions to bring algae-sourced biofuels to market. It also takes a brief look at a number of other current projects.

Paul Steele, Executive Director of the cross-industry aviation coalition ATAG said, “It wasn’t many years ago that the idea of using biofuels for flight was dismissed out of hand on technical and safety grounds. Today, we have tested a range of biofuels in flight, we have made our way through a very tough technical standards process to ensure flight safety and we have been working hard to establish the correct sustainability criteria for the fuels we use.”

“The biggest challenge now lies in ensuring a steady, reliable, cost-effective and sustainable supply of this new energy source. The fossil fuel industry has had a century to develop its fuel sources, supply chains and distribution networks. Not to mention its profit margins. The fledgling aviation biofuels industry will need to catch up and this will require capital from the investment community and start-up incentives and de-risking from governments.”

Powering the Future of Flight takes a bold approach in identifying ‘six easy steps’ that governments and policymakers could follow to assist aviation and the biofuels sector in embracing sustainable aviation biofuels. The steps are:
1) Foster research into new feedstock sources and refining processes
2) De-risk public and private investments in aviation biofuels
3) Provide incentives for airlines to use biofuels from an early stage
4) Encourage stakeholders to commit to robust international sustainability criteria
5) Understand local green growth opportunities
6) Establish coalitions encompassing all parts of the supply chain

“Of course, these six steps are not actually an ‘easy’ task. What we set out to do is illustrate the process in a simple way.

“It is clear that aviation is ready to become a major customer in the sustainable biofuel market. It is vital for our future and it is an important step in reducing carbon emissions. This publication, we hope, will provide some inspiration and ideas based on work already underway.”

Fri 18 Feb 2011

Heads of European airlines meeting in Brussels Friday reasserted their commitment to an environmentally responsible airline sector. The members of the Board of the Association of European Airlines were assembled for their first meeting under the Chairmanship of Steve Ridgway, Chief Executive of Virgin Atlantic and reasserted AEA’s support of an environmentally effective and economically efficient ETS, as a precursor to a global scheme.

However they raised issues with the ETS with which many airlines have been struggling with for the past 2 years and are now undergoing their first verification exercise, which is a very challenging time for most carriers. “The 1 January 2012 start date for EU ETS is fast approaching, but there are still many critical areas which need to be resolved”, said Steve Ridgway. “It’s imperative that the Commission fixes these issues to ensure that the Emissions Trading Scheme works as always envisaged, and avoids creating unfair market distortions or undermining its environmental effectiveness”.

If aviation’s contribution to society is not to be diminished in the quest for lower environmental impact, instruments such as ETS need to be complemented by clean technology, said the AEA Chairman, “We call on the EU to stimulate the development of step change technologies – putting Europe at the forefront of this new industrial revolution - critical amongst which are sustainable alternative fuels with their obvious potential to reduce aviation’s carbon footprint”.

The AEA CEOs expressed their readiness to cooperate fully with the European Commission in working out the necessary conditions for an effective transition to new generation fuels.  “The Treasuries of EU Member States will be receiving massive incomes from ETS.  It is only common sense that these revenues should provide the investment needed to further the aims of an environmental policy”, said Mr Ridgway. 

“This includes funding for the SESAR project to provide the next generation of Air Traffic Management, and the research & development effort to break aviation’s current dependency on fossil fuels, stabilise the energy supply chain and deliver more quickly a lower carbon future for our sector”. 

28 Jan 2011, Bloomberg

Europe’s emissions markets may be “significantly harmed” unless regulators set a deadline for fixing the security flaws exposed by carbon thieves, the International Emissions Trading Association said.
The 30 registries that track ownership of emission allowances in Europe were closed for a ninth day, preventing prompt trading even as futures markets remain open. About 29 million euros ($40 million) of permits are missing in a series of hacking attacks, according to figures announced last week by the European Commission, which regulates the world’s largest greenhouse gas market by traded volume.
The commission received the first batch of reports it demanded last week to show that nations have adequate security, it said today in a statement. That means some registries may be able to reopen in the second half of next week, it said. ICE Futures Europe, the biggest market for carbon, said yesterday its next-day market will be closed until at least Feb. 7. The Czech registry said it would be closed for six weeks or longer.

“IETA deplores the lack of attention paid to enhancing registry security despite last year’s phishing attacks and despite repeated warnings,” Henry Derwent, president of the Geneva-based lobby group, said today in a statement. “The impact on the market of protracted closures could be significantly enhancing risk exposures in terms of unwitting purchase of stolen and potentially reclaimable allowances.” Elaine Bailey, spokeswoman for ICE, declined to say whether any missing allowances ended up in its clearing house.

‘Phishing Attacks’

Carbon market fraud in the last two years included value- added tax fraud and so-called “phishing attacks,” in which internet fraudsters con factories out of passwords and then steal allowances.
“While the safety of online banking has been scaled up, EU member states have failed in protecting an 80 billion-euro market, thereby undermining the EU’s main tool to reach climate objectives,” IETA said.

EU Climate Commissioner Connie Hedegaard, speaking today at the World Economic Forum in Davos, Switzerland, said EU nations are “working very hard” to improve security and rejected suggestions that carbon markets have been wrecked by fraud. “It’s not the system that is wrong,” Hedegaard said in an interview. “Wherever you have financial assets of some kind, you can experience fraud. We see that in all sorts of other areas. Just because someone robs a bank, you do not say the whole banking system doesn’t work.”

Blackstone Global Ventures, a trader based in the Czech city of Brno, informed national administrators on Jan. 19 that it lost 475,000 allowances. The next day, Barclays Plc said it had stopped most spot carbon trading last month after Holcim Ltd., the Swiss cement maker, lost 1.6 million EU permits worth another 23.6 million euros. CEZ AS, the largest Czech power producer, said yesterday it lost 10.5 million euros worth of allowances in unauthorized transfers in last week’s raids on the national registry.

“We are in close dialogue with member states on this,” Hedegaard said. “They’re working very hard. Some could open rather soon, some could take a little bit longer. We want to do this with quality rather than rushing and then something happens.”

While the system is set to have a central clearinghouse in the next trading period starting in 2013, so-called national registries are now responsible for tracking ownership of permits. “Until then, it’s the responsibility of the member states to take care of security,” Hedegaard said.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net; Ewa Krukowska in Brussels ekrukowska@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

2 Nov 2010
The Financial Times reported today that the owner of the US’s only nationwide industrial cap-and-trade (also known as ETS) market, and which is a voluntary scheme at present, has said companies such as Ford and IBM were no longer interested in trading carbon emissions credits in the absence of US government legislation. Senate Democrats have abandoned interest in cap-and-trade legislation and with Republicans expected to make big gains in this week’s elections the outlook for legislation looks very remote. Link to full article

It therefore appears that any such scheme including aviation in the US is even more remote. The recent ICAO talks failed to agree on implementing any economic measures such as cap and trade therefore the EU ETS is the only significant scheme remaining and which the EU is likely to support even more strongly given their perceived lack of action elsewhere in the world at the moment.

Meanwhile the Korea Herald reports that their government is pushing to introduce a cap-and-trade system for carbon dioxide as early as next year. The trading mechanism is a key instrument for Korea’s goal of reducing greenhouse gas emissions by 30 percent below “business-as-usual” levels until 2020. The Ministry of Environment is drafting an emission exchange scheme, planning to send a related bill to the National Assembly within this year and implement the system in 2011.

Under such programs, governments impose emissions caps on companies and organizations and those that succeed in cutting emissions below their quotas are allowed to sell remaining allowances.
The World Bank valued the global carbon market at $144 billion in 2009, up 6 percent from 2008 in spite of a global recession. The figure is projected to grow to $170 billion this year. The European Union’s Emissions Trading Scheme is the world’s largest carbon trading scheme and makes up 64 percent of the total sales volume in 2009, worth $118 billion. Link to full article

October 11, 2010
The transportation chief of the European Union said Monday that airlines based in the United States could receive an exemption, at least in part, from European carbon regulations if Washington moved to reduce greenhouse gas emissions at home. European Union officials are trying to persuade airlines based elsewhere to comply with European climate policies. “We are ready to negotiate and to talk about these issues and not only make declarations,” Siim Kallas, the European commissioner for transportation, said during a news conference. “Adequate measures from other countries can be taken into account.” The European Union agreed two years ago to include in the regulations all airlines taking off from, and landing in, the European Union starting Jan. 1, 2012. Full article at New York Times

In recent days the United States, Canada and Mexico have urged the International Civil Aviation Organization to pass a resolution stating that countries “seeking to implement an emissions trading system that applies to other contracting states’ aircraft operators” do so only “on the basis of mutual agreement.” In a copy of the submission seen by The International Herald Tribune, the United States, Canada and Mexico acknowledged that pressure was increasing to establish international rules on aviation emissions. But they said there was “no consensus on such a global approach at this time,” adding that disagreement remained among countries on “the application of one state’s emissions trading system to another state’s airlines.” If agreed upon, the resolution would be non-binding. But it would add to international pressure on Europe to at least delay the start of its system. Read the full article in the New York Times

2 Sep 2010
Options to buy European Union carbon permits for 2012 traded in London yesterday at a strike price of as much as 50 euros a metric ton, according to CarbonDesk Ltd and reported on Bloomberg

According to James Hansen, the top climate scientist at NASA, the need to put a price on carbon is the world’s best hope at avoiding a scenario of runaway global warming. He has highlighted at the European Geosciences Union meeting last week that that globally government subsidies to oil, gas and coal companies total a massive USD 500 billion per annum and they have impacted an effective transition to alternative fuels and technology. He said “The most efficient and economically affordable approach is to put an honest price on the different energies”. “Presently, we’re subsidising fossil fuels and not making them pay for their costs to society.”

According to a report by Bloomberg the head of ICAO says that the airline industry may need some form of carbon market beyond 2015. “It’s too early to foretell the outcome of a three-year process ending in September next year that is considering greenhouse-gas trading for the industry.” said Roberto Kobeh “My personal opinion, and a realistic opinion, is that we have to include market-based measures sometime, but I cannot say when.”
An expert group at ICAO have recently narrowed down twenty proposals down to four current contenders:

i) mandatory offsetting, ii) mandatory offsetting complemented by a revenue-raising mechanism, iii) emissions trading cap-and-trade, iv) global emissions-trading baseline and credit system.

Overall carbon emissions within the scope of the Aviation EU ETS fell by 1.8 percent in the first half of 2010 compared to the same period in 2009, according to data compiled by consultancy RDC Aviation. Total aviation CO2 emissions across 27 EU states amounted to nearly 113 million tonnes in the first half of 2010 compared with 115 million tonnes last year. The impact of the volcanic ash cloud that severely affected air traffic in northern Europe in April is not easy to measure although the UK and France experienced falls of around 4 percent in emissions over the period, whilst Germany and the Netherlands saw smaller increases in total emissions. This is reflected in airline terms with British Airways and Air France showing decreases in emissions while Lufthansa and KLM had rises. As 2010 is the benchmarking year for calculating the allocation of free emission permits, airlines are perversely incentivized to ensure their emissions are kept high to maximize their share. Continue to read the article at greenaironline.com

After many months of waiting the EU Commission has finally released a tool primarily for small emitters to allow them to estimate fuel consumption, hence CO2 emissions, as part of their compliance with the EU Emissions Trading System. The tool enables aircraft operators that qualify as “small emitters” with few flights or emissions to use simplified monitoring procedures. However, the tool can also be used by other larger aircraft operators to also estimate of fuel consumption for specific flights where actual data is exceptionally not available and hence could become an important tool for them.

The tool was developed by Eurocontrol and it uses fuel consumption coefficients that are statistically robust and which are believed to have included the input of various aicraft operators to make it more accurate. The tool covers the majority of common aircraft types and it meets the requirements of the monitoring and reporting guidelines for the EU ETS established by the EU Decision 2007/589/EC, with a calculation approach based on individual flights, actual route length and statistically sound fuel consumption relationships.

The tool will undoubtedly reduce the ETS compliance administrative requirements for small operators and perhaps the larger ones. The tool is available for download and use free of charge and a description on how to use it on Eurocontrol’s web site at:  http://www.eurocontrol.int/environment/public/standard_page/small_emitters.html.

The eighth of July 2010 has entered the history books as being an incredible achievement in the advancement of human flight. This morning at a small military airbase in Switzerland an experimental solar-powered aircraft launched on the previous day landed safely after successfully flying through the night. The incredible feat is a step toward the even more incredible aim of circling the globe using only the power of the Sun to fuel the plane.

The aircraft used super-efficient solar cells and batteries to stay in the air after the Sun’s rays had faded. The plane touched down at Payerne airfield at 0900 (0700 GMT) after a total flight time of 26 hours. During the flight it reached a unbelievable height of 8,700 m (28,543 ft). It is the longest and highest flight recorded by a solar-powered plane. The aircraft was steered by Andre Borschberg, a former fighter jet pilot from Switzerland. The plane has 12,000 solar cells arranged on top of its wing which stored enough energy to power the plane for the flight through four engines.

The designers, the Solar Impulse team led by Mr Borschberg and fellow aviator Bertrand Piccard, say that this proves that a plane can be kept in the air around the clock. “Nothing can prevent us from another day and night, and the myth of perpetual flight.” The team will now build a new, more advanced, model of the plane and they plan to aim to circumnavigate the globe by 2013.

Read more about this amazing project at Solar Impulse

Fri 21 May 2010 – Japan’s Ministry of the Environment has presented Japan Airlines Group (JAL) with its Eco-First award in recognition of the airline’s various environmental conservation initiatives. The Eco-First programme was established in 2008 to encourage environmental preservation activities by companies in compliance with the Kyoto Protocol. During the past year, JAL has been involved with trialling new advanced flight operational measures and earlier last year conducted Asia’s first sustainable jet biofuel flight. JAL has also made an Eco-First Pledge in which it resolves to achieve a 23 percent reduction in CO2 emissions per revenue-tonne-kilometre (RTK) in 2020 compared with levels in 2005. The Eco-First award commended JAL for its diligence in advocating environmental awareness and for conducting various recycling measures to minimize its environmental burden. Full story at our friends at Greenaironline

Thu 20 May 2010 – Following a recent meeting in Sao Paulo, ten organizations have agreed to form the Brazilian Alliance for Aviation Biofuels (Aliança Brasileira para Biocombustíveis de Aviação – ABRABA). They include four airlines – Azul Brazilian Airlines, GOL, TAM and TRIP – as well as aircraft manufacturer Embraer and the Brazilian Aerospace Industry Association (AIAB). Representing the biofuels industry are producers and developers of biomass sources such as jatropha, sugarcane and algae.  The alliance follows an announcement by TAM that the airline will carry out Latin America’s first commercial aircraft biofuel flight during the second half of 2010 using a 50/50 blend of jatropha and conventional jet fuel (full story).

Governments around the world have reaffirmed their plans to cut greenhouse gas emissions in support of last month’s Copenhagen climate summit. Nations signing up to the summit accord were urged to outline pledges by Sunday. States producing at least two-thirds of emissions have done so. Correspondents say the accord is widely seen as a disappointment. However, the level of support for it is seen as an indicator of prospects for a legally binding deal later in the year. Read the full article at the BBC

The government has this week referred a legal challenge from a group of US airlines against their planned inclusion in the European Emissions Trading Scheme (ETS) to the European Court of Justice, vowing to vigorously contest the case and expressing confidence that it had a robust defence. Last month, American Airlines, Continental Airlines and United Airlines – backed by the US Air Transport Association (ATA) – formally filed for a judicial review of their inclusion in the ETS in the British courts, arguing that it is outside the EU’s jurisdiction to include flights to and from the US in the bloc’s cap-and-trade scheme. Read the article at Business Green

The quickest way to cut emissions from aircraft could be better flight management rather than new technology, an Oxford University study has found. Better air traffic control determining how, when and where planes fly could help quickly achieve significant emission cuts.  These include more direct flight paths to airports and less waiting to land. Full article at the BBC

IATA DG and CEO Giovanni Bisignani does not expect the EU Emissions Trading Scheme to start in 2012 as scheduled owing to legal challenges concerning its unilateral implementation. “I am convinced it will not happen,” he told ATWOnline at the industry body’s Global Press Day in Geneva. “You will see that many governments will legally challenge the unilateral approach of EU ETS in the coming years,” he said, adding that he anticipates filings from the US, Japan, China and others. Read the full article at ATW here

The International Energy Agency has warned that the price of carbon credits will need to reach $50 per tonne of CO2 by 2020 and $110 by 2030 to make high-tech solutions to climate change economically attractive. Carbon permits now trade at $21 a tonne in the European Union.

In the US a trading scheme is being negotiated. The Senate is not likely to pass a bill before 2010, has already set $48 as the ceiling carbon price by 2020. By 2030 that ceiling increases to about $90.

So what does that mean for airlines now entering the EU ETS? We believe that the legislators, with pressure from the financial community and environmental lobbyists, will take steps to tighten the carbon market and get the price lifting to those levels well before the IAE target dates.

We have already shared with you various price forecasts that expect EUAs in the EU ETS to be back at their “natural” level of EUR 30+ by 2012/13. Of course all these forecast could be wrong, but all airline CFO / COOs really need to do their homework and consider taking specialist investment advice and decide if, and how much, carbon they should be purchasing now and in 2010 in order to build up their financial account for CO2 compliance in 2013. Or should they wait until 2013 and buy at auction or on the open market? What other options do aircraft operators have for minimising their ETS costs and risks?

To get the report and related information go to the IAE site here

All Nippon Airways (ANA) has just completed a month-long series of 42 domestic and international ‘e-flights’ to promote ecological travel on the ground and in the sky as part of a range of environmental initiatives. The eco-trial flights, which first started in 2006, provide in-flight amenities that are more environmentally friendly, as well as informing passengers on how to reduce the impact of carbon emissions on their journeys. A short video on ANA’s various environmental preservation activities is shown both onboard and on the ground. Read the full article at Greenaironline

Europe attempted to reassert its international leadership in the fight against global warming today, offering to slash its greenhouse gas emissions by up to 95% by 2050 and by 30% by 2020 if a climate change pact is sealed in Copenhagen in six weeks’ time. “This should be seen as a clear message to the world,” said Andreas Carlgren, the Swedish environment minister who chaired the Luxembourg meeting. “We expect to reach an agreement in Copenhagen,” he added, after environment ministers from 27 countries finalised a common EU negotiating position. Full story here

Tue 13 Oct 2009 – A Rolls-Royce-powered Airbus A340-600 operated by Qatar Airways yesterday undertook a six-hour flight between London Gatwick and Doha using a jet fuel made from natural gas blended 50-50 with conventional petroleum-based kerosene. The synthetic Gas-to-Liquid (GTL) blended fuel, developed by Shell, is expected to be produced in commercial quantities of around one million tonnes per annum from 2012. The synthetic blended fuel was recently approved for safe commercial aviation use by ASTM International. Although there are no reductions in carbon emissions, the cleaner burning fuel emits lower sulphur dioxide and particulates, providing improved local air quality at airports. Read the full article at Greenair Online

The UK government has to defend a cap on aviation emissions at “no higher, and possibly lower, than 2005 levels in the period to 2050” as part of a wider global agreement to tackle climate change at December’s UN summit in Copenhagen, the UK’s Committee on Climate Change argued in a letter to Secretary of State for Transport Andrew Adonis and Secretary of State for Energy and Climate Change Ed Miliband. Full story at ATW online

Adapting to the damage caused by climate change will cost hundreds of billions of dollars a year, a group of scientists said on Thursday – putting the price tag far higher than previously estimated. The worldwide cost of adaptation – including better flood defences, improving transport infrastructure and better resilience to drought – would probably reach sums in the region of $140bn to $210bn a year by 2030, said the group of climate experts brought together by Imperial College London and the London-based International Institute for Environment and Development. Full article

Greenair Online Fri 28 Aug 2009 – Despite considerable advances in understanding the impact of aviation on climate change, significant uncertainties remain in determining the full non-CO2 effects of aircraft emissions. This is the main conclusion of a major scientific assessment report ‘Transport impacts on atmosphere and climate: Aviation’ just published in the journal Atmospheric Environment. This is the first comprehensive international assessment update on the subject since the groundbreaking Intergovernmental Panel on Climate Change (IPCC) report published in 1999. The new report rejects the use of an emissions ‘multiplier’, or index, first introduced in the IPCC report, as a suitable metric for measuring the total impact of aviation emissions on climate. The climate impact of aviation is driven by long-term impacts from CO2 emissions and shorter-term impacts from non-CO2 emissions and effects, which include the emissions of water vapour, particles and nitrogen oxides (NOx) Full article

The UK announced on 3 August 2009 an extension of the TK Monitoring Plan deadline to 31 August 2009 and the Emission Monitoring Plan to approximately 11 weeks from the date the European Commission publishes the list of UK Aircraft Operators in OJEU...so not until end October and counting...!

However, given the EU’s recent comments that there is no justification for the extension of the UK deadline, we advise that if you are an aircraft operator reporting to the UK that you take expert legal advice before making any decision to submit after 31 August 2009.

Here is the UK letter to the Aircraft Operators:
UPDATE_Aviation.pdf

Here is the update on UK regulatory situation:
aviationregulationsstageiforpublication.pdf

Production of alternative fuels for commercial airline use has passed another milestone as a key committee of certifying body ASTM International has passed a specification for non-petroleum-based fuels, which now has been assigned the working number D7566. The petroleum products and lubricants committee at ASTM, a voluntary international standards development organisation, voted in favour of a specification that will enable commercial production of blends of generic synthetic paraffinic kerosene (SPK) derived from the Fischer-Tropsch process after its aviation fuels subcommittee took the same action in June. Read the full article at Flightglobal

test1

A new report, entitled ‘Greener skies thinking’, by the centre-right think tank Policy Exchange recommends that in order to meet 2050 emissions targets there must be a wide-scale deployment of sustainable bio-jet fuels. It calls for the setting of achievable and enforceable targets for replacing standard kerosene jet fuel with bio-jet fuel from 2020 through the implementation of an EU-wide Sustainable Bio-jet Fuel Blending Mandate. The mandate would see the proportion of bio-derived blended jet fuel rise from 20% in 2020 to 80% in 2050. Aviation is currently excluded from the EU Renewable Energy Directive on biofuels. The result of the mandate would be reductions of greenhouse gas emissions from the UK and EU aviation sectors of 15% in 2020 and 60% in 2050 relative to current predictions, calculates Policy Exchange. Read the full article at Greenaironline

The UK has blamed Brussels for its failure transpose the EU directive on the aviation ETS into national legislation in time to comply with the August 31 deadline by which operators were required to submit emissions monitoring and benchmarking plans. A government statement said there first needed to be a “firm and agreed” list of operators to be regulated by each EU member state. As this list was not now expected to be published by the Commission until later this month, the UK government says it is legally unable to lay the first stage of regulations transposing the directive. Operators will now be required to submit their plans within 11 weeks after the regulations are laid before Parliament, which could move the deadline to late October. Other EU States have no plans, so far, to follow the UK’s decision but few appear able to transpose the directive before the end of August. Read the full article at Greenair Online

A voluntary programme to assess and recognize efforts by airports to reduce CO2 emissions within their direct control was launched yesterday at the ACI EUROPE Annual Congress in Manchester. Accounting for 26% of the passenger traffic handled in Europe, a total of 31 airports have applied to join Airport Carbon Accreditation. The programme, which has been devised by international consultancy WSP Environmental, comprises four rising levels of accreditation: Mapping, Reduction, Optimisation and Neutrality. It is hoped the step-by-step process will encourage airports to reduce their carbon emissions with the ultimate goal of carbon neutral operations. Full article at Greenair Online

Boeing and its industry partners involved in the three recent biofuel demonstration flights have released the high-level elements of a study, ‘Evaluation of Bio-Derived Synthetic Paraffinic Kerosene (Bio-SPK)’, in which analysis shows that the sustainable biofuels used in the flights performed favourably in comparison to petroleum-based fuels. The Bio-SPK – the industry’s new terminology – fuel blends demonstrated higher energy density per unit mass than typical jet fuel, potentially enabling airplanes to travel further using less fuel. The blended fuel on the Air New Zealand, Continental Airlines and Japan Airlines flights displayed no adverse effects on any of the aircraft systems. Full article at our friends Greenair Online

Continental Airlines has announced the results of its Jan. 7, 2009, biofuel demonstration flight, which was conducted in partnership with Boeing, GE Aviation/CFM International, and Honeywell’s UOP. The biofuel blend performed as well as or better than traditional jet fuel, displaying an approximately 1.1 percent increase in fuel efficiency over traditional jet fuel in different stages of the demonstration flight. Overall life cycle greenhouse gas emissions related to using a biofuel of the nature used on the Continental demonstration flight are estimated to be reduced by 60 percent to 80 percent as compared to traditional jet fuel. Full article

The new Chairman of the IATA Board of Governors, Cathay Pacific CEO Tony Tyler, said at the association’s Annual General Meeting in Kuala Lumpur that the most important task facing the IATA management over the next 12 months was to deliver “a workable and sensible” approach to aircraft emissions. IATA’s Director General and CEO, Giovanni Bisignani, told journalists that the cost to the industry of complying with the carbon-neutral target announced during the AGM would run into billions of dollars. During the AGM, British Airways Chief Executive Willie Walsh said IATA must take the initiative over climate change negotiations as ICAO had not done enough. Speaking to the media after the AGM, Cathay’s Tony Tyler said: “The most important thing we [the IATA management team] can deliver for the industry over the next 12 months is a workable and sensible approach to emissions so that the airline industry can continue to develop and continue to play a vital role in connecting people around the world and facilitating trade and global development. Read the full article at GreenAir Online

Asserting that aviation is the “fastest-growing emissions source among modes of transportation,” a European Commission official reiterated yesterday that all airlines that operate to the EU must submit plans for monitoring and reporting carbon dioxide emissions by Aug. 31 to relevant authorities in EU member states in advance of a 2010 “pre-compliance phase” for the Emissions Trading Scheme that includes aviation from 2012. Read the full article at ATW Online

Redirecting air flow sideways across an aircraft’s wings causing them to oscillate could dramatically cut airline fuel costs and CO2 emissions by 20%, according to research funded by the Engineering and Physical Sciences Research Council (EPSRC) and Airbus in the UK. The approach uses many thousands of tiny air powered jets which redirect the air, making it flow sideways back and forth over the wing, severely reducing mid-flight drag. The research is still at concept stage but it is hoped to trial the wing technology as early as 2012. Read the full article at GreenAir Online

If Airbus and Boeing decide to delay the successor A320/737 aircraft to the mid-2020s, an open rotor could power the new-generation planes. At least that is the thinking driving engine manufacturers to continue examining the concept despite considerable challenges to making it viable. Read the full article at ATWOnline

The fourth and final meeting of ICAO’s 15-member Group on International Aviation and Climate Change (GIACC) starts in Montreal on Monday (May 25) with expectations for a unanimous agreement on a global action plan to curb international aviation emissions looking increasingly uncertain. The International Air Transport Association (IATA) is to deliver a paper to the group which outlines how a global sectoral approach on economic measures to address aviation CO2 emissions could be developed and sets out fuel efficiency goals up to 2020 and net CO2 reduction targets by 2050. In a paper prepared for GIACC by the ICAO Secretariat, however, aviation CO2 emissions could grow from 632 Mt CO2 in 2006 to between 890 and 2,500 Mt CO2 by 2050, excluding a contribution from alternative fuels. Read the full story at Greenaironline

Fri 24 Apr 2009 – Virgin America has become the first airline to join The Climate Registry, the non-profit collaboration of US, Canadian and Mexican states and provinces that sets standards to calculate, verify and report greenhouse gas emissions. The airline will report accurate and recognized emissions data as a Member on an annual basis as it measures and manages its emissions and CO2 reduction goals. Although the move is voluntary, it comes as the US Environmental Protection Agency (EPA) considers how to design a mandatory GHG emissions reporting system in which The Climate Registry could play a future role. “As the only California-based airline, it is in our DNA to make environmentally sustainable practices a core priority in our business model,” said Dave Pflieger, Senior Vice President of Legal, Government Affairs and Sustainability at Virgin America. “We’re proud to join visionary California leaders like Senator Boxer and Rep. Waxman in calling for transparency in reporting and controlling CO2 and other greenhouse gases. We hope to do our part to promote awareness and transparency about the impact our industry has on the environment.
Read the full article at our friends greenaironline

The total influence of aviation on climate is considerably greater than has been suggested solely on the basis of its current 2.8% share of current anthropogenic fossil CO2 emissions, says two leading European climate researchers. Their analysis shows that from its beginnings in 1940 through to 2005, civil aviation has been responsible for a rise in global mean temperatures of around 0.028 degrees C, representing approximately 4.7% of the total anthropogenic change. These are the main conclusions of an Omega-funded study to assess the potential impact of aviation growth on global temperature changes carried out by Dr Sarah Raper, Senior Research Fellow at Manchester Metropolitan University’s Centre for Air Transport and the Environment (CATE), and Dr Malte Meinshausen of the Potsdam Institute for Climate Impact Research. They say a fundamental change in long-range transportation behaviour and technology is a necessity if climate protection scenarios, such as halving global emissions by 2050, are to be realised. Read the full article at greenaironline

European MEPs voted last week in favour of the Single European Sky II (SES II) legislative package that will bring about shorter flight times, reduced aircraft fuel consumption and therefore lower CO2 emissions. An agreement with transport ministers had been reached the previous week. EU airspace is currently broadly divided into 27 different systems under the control of national governments, each with different rules and ATC operations, leading aircraft to fly circuitous routes. The package will speed up the unification process with the creation of Functional Airspace Blocks (FABs) before June 2012.
Despite a series of regulations adopted in 2004, the first SES package made little progress because of a failure to overcome numerous hurdles encountered when trying to integrate European airspace as States looked to protect their sovereignty. The new regulations provide for a whole series of improvements that should benefit the aviation industry by an estimated two to three billion euros ($2.6-4bn) over the next 10 years, with 16 million tonnes of CO2 emissions being cut as a result of reduced flight times. Full story at greenaironline

As he clinched the Democratic nomination for president last year, Barack Obama declared: “This was the moment when the rise of the oceans began to slow and our planet began to heal.” Not yet two months into his term, despite lots of other pressing concerns, Mr Obama has taken on the task of tackling global warming with zeal. He has increased government spending on environmental causes, instructed civil servants to increase the fuel-efficiency of America’s cars, promised to double America’s output of renewable energy and urged Congress to pass the greenest measure of them all: a cap on the country’s emissions of greenhouse gases. Could Mr Obama live up to his grand green rhetoric? Read the full article at The Economist

Lord Stern, the economist who produced the single most influential political document on climate change, says he underestimated the risks of global warming and the damage that could result from it. The situation was worse than he had thought when he completed his review two-and-a-half years ago, he told a conference yesterday, but politicians do not yet grasp the scale of the dangers now becoming apparent. “Do politicians understand just how difficult it could be, just how devastating rises of 4C, 5C or 6C could be? I think, not yet,” Lord Stern posed to the meeting of scientists in Copenhagen. Read the full article.

That jet engines have evolved over the past few decades will be apparent to any seasoned air traveller. Early jet engines had narrow inlets and were very noisy, but as the diameter of the fans at the front increased, the engines became quieter. Compared with a rowdy 1960s jet, a modern turbofan is some 80% quieter and burns as little as half as much fuel—thus producing fewer greenhouse gases. But with regulation of aviation emissions likely in the coming years in order to combat climate change, jet engines must become cleaner and more frugal still. Read the full article here

An illuminating 5 minute video report from the London School of Economics and The Independent on the role of economics in helping solve climate change.
View here

Already trapped in a tailspin as earnings plunge and a global recession curtails passenger and freight traffic, Asian airlines face yet another challenge—figuring out how to pay for their greenhouse gas emissions. Green groups, governments and passenger bodies are piling on the pressure for airlines to rein in carbon pollution, and to have their emissions included in a broader U.N. climate pact. Carriers such as Singapore Airlines, Cathay Pacific and Qantas, which fly some of the world’s longest routes, already plan to curb or offset pollution through emissions trading, more efficient planes and other measures.
But they worry that numerous domestic and regional emissions schemes now emerging could prove costly and unfair because not all airlines will be treated equally, crippling their competitiveness and their already shrinking earnings. Read the full article at Reuters

The European Commission has published a list of over 2,700 aircraft global operators who must sign up to and comply with the European Union’s Emissions Trading Scheme (ETS) from 2012. All airlines affected, particularly non-EU operators, will have learned for the first time of their obligation and mandatory requirement to comply with the ETS.  IATA member airlines believed that the official political line taken by their association with regard to the unilateral EU action was illegal and would have been challenged by the US and other States.  As a consequence and to date, many IATA member airlines have taken no active preparation for implementing the ETS.

It appears that IATA and even ICAO may have mis-calculated the EU’s intentions with regard to clamping down on the rapidly rising aviation emissions, which were forecast to offset emission improvements made by other polluting industries, despite the current economic crisis. The EU Parliament passed the necessary legislation by a massive majority last October, which has since been ratified by the EU Member States. Unfortunate for the airlines they have been embroiled in the politics and apparent denial of the real issues by IATA and ICAO. To date, the airlines have received minimal assistance from these agencies, and they are now left largely to their own devices to prepare for implementation of the ETS, especially at a time when they can least afford as they considerably downsize their organisations to cope with the current economic crisis.

Although the airlines are not expected to join the scheme until 1 January 2012 the “double-hit” for the airlines will be if they fail to submit necessary documentation to the EU by the official deadline, which is expected to be before July 2009.  Failure to submit the required documentation will result in airlines losing their entitlement to the 85% of carbon allowances offered by the EU, which could result in the average carrier incurring significant losses in revenue. The team of aviation experts and professionals at “Green Aviation” an environmentally concerned non profit organisation is extremely disappointed that the airlines should have been exposed in such a way.  Fortunately, Green Aviation we will be able to assist some airlines in their plight to adhere to the ETS deadline, but many more may not be able to enlist the support they may need.  Given the current economic climate, it is believed this issue could have been avoided and managed more appropriately with robust consultation, planning and stakeholder engagement.

To read more about the list of operators visit greenaironline.com