EU EMISSIONS TRADING SCHEME – AIRCRAFT OPERATORS

Directive 2008/101/EC amending Directive 2003/87/EC requires aircraft operators that perform flights which depart from or arrive at an aerodrome situated in the territory of a Member State of the European Union to participate in the EU ETS from 2012, in respect of carbon dioxide emissions, unless exempted pursuant to the criteria set out in the Directive. Legal Notice 445 of 2010 transposes this directive. (Corrigendum)


Scope – Annex I to the EU ETS Directive

If you are an aircraft operator, you can determine whether your aviation activity falls within the scope of the EU ETS on the basis of Annex I to the EU ETS Directive.  Annotated explanation of the categories of aviation categories listed in this Annex, with respect to aviation activities, can be found here.

The Directive provides for one Member State to be responsible for administering each aircraft operator participating in the EU ETS.  The administering Member State in respect of an aircraft operator shall be:

a)         in the case of an aircraft operator with a valid operating licence granted by an EU Member State, the Member State which granted the operating licence to that operator;

and
                  
b)         in other cases, (for example an operator with an operating licence issued by a state that is not an EU Member State or an operator which does not require an operating licence to perform aviation activities), the Member State with the greatest attributed emissions from flights performed by that aircraft operator in the base year.  For an aircraft operator that started operating in the European Community after 1 January 2006, the base year is the first calendar year of operation; for an operator that started operations in the Community before 1 January 2006, the base year is the calendar year starting on 1 January 2006.

The European Commission has published a list of aircraft operators which operated an activity listed in Annex I on or after 1 January 2006, specifying the administering Member State for each aircraft operator. This list is updated every year. Information relating to the list of aircraft operators can be accessed here.

It is important to note however, that if your organization is not on the list it does not necessarily mean that your organization does not fall within scope of the EU ETS.  If you are not on the list but do perform an aviation activity as listed in Annex I, then you are required to meet all relevant obligations set out by the EU ETS Directive.
             

Allocation process – auctioning and benchmarking

The total quantity of allowances - the cap on emissions - available for aircraft operators falling within scope of the system has been determined according to the modalities set out in the Directive.

For the period 1 January 2012 to 31 December 2012, the total quantity of allowances is equivalent to 97% of the average of the annual emissions in 2004, 2005 and 2006 from aircraft performing an aviation activity listed in Annex I.  For the period 1 January 2013 to 31 December 2020, the cap is equivalent to 95% of the average of the annual emissions in 2004, 2005 and 2006 from aircraft performing an aviation activity listed in Annex I.

Allocation of allowances (Figure 1) is partly by free allocation on the basis of benchmarking and partly through auctioning (15% of total allowances will be auctioned for the period 1 January 2012 to 31 December 2012; 15% auctioning also applicable for the period commencing 1 January 2013).  The benchmarks against which free allocations are calculated have now been determined, in terms of tonnes CO2/tonne-km. 

Figure 1: Determination of cap, benchmark, and allocation of allowances. (Source: MEPA)

The competent authority has now calculated the free allocations for those operators falling under Malta’s administering responsibility and which have applied for free allowances by submitting a tonne-kilometre data report for the year 2010:

You are required to make use of the templates developed purposely for the submission of monitoring plans:

Monitoring plan template for tonne-km data

Monitoring plan template for annual emissions

As an aid to facilitate the completion of these templates, you may also wish to refer to the following guidance document (prepared by the Dutch Emissions Trading Authority in cooperation with the UK Environment Agency) and exemplar plans (prepared by the German Emissions Trading Authority, DEHSt):

Guidance for the aviation industry – monitoring and reporting

Exemplar monitoring plan for tonne-km data

Exemplar monitoring plan for annual emissions

Reporting of tonne-km and annual emissions data

You should report tonne-km data or annual emissions data, as appropriate, using the templates developed purposely:

Reporting template for submission of tonne-km data

Reporting template for submission of annual emissions data

The report of tonne-km data for the monitoring year 1 January 2012 to 31 December 2012 shall be submitted to the Competent Authority by not later than 31 March 2013.

Your annual emission reports for the monitoring calendar years 2010 and 2011 are not intended for the purposes of surrendering allowances to cover emissions.  This is the case however as from 2012.  Reports of annual emissions data, shall be submitted to the Competent Authority by not later than 31 March of the year subsequent to the monitoring year; thus, for the monitoring year 1 January 2012 to 31 December 2012, the report of annual emissions has to be submitted by not later than 31 March 2013.

Reports of tonne-km data and annual emissions must be verified by a competent,  independent, accredited verifier before being submitted to the Competent Authority.  A verifier will check for any inconsistency with the monitoring plans as approved by the competent authority and any misstatements in the reports.  Proof of satisfactory verification, in the form of a verification opinion statement must be submitted with the reports.  It should be remembered that the tonne-km report will be the basis of the free allocation of allowances that you will get for the applicable period; refer to section Allocation process – auctioning and benchmarking for further details.

Accounting for emissions

Under EU ETS legislation, for each year starting from 2012, as an aircraft operator you are required to surrender an amount of allowances equivalent to the quantity of actual emissions reported in your annual emission reports, through your registry account.  Surrendering of allowances must take place by not later than 30 April each year in respect of the reported emission of the previous year.  Thus, for emissions reported for the year 2012, surrendering of allowances must take place by not later than 30 April 2013.

Further information on the registry system may be found in section REGISTRY.

If you find that your allocation of allowances is less than what you will need to account for all of your actual emissions, you can either reduce emissions from your activity through various applicable emission reducing measures, or purchase additional allowances.  If, instead, you find that your allocation of allowances is greater than what you require to account for all your activity’s actual emissions, you can sell excess allowances.  You can trade in several ways, including by trading directly with other companies participating in the EU ETS, buying from or selling to intermediaries, using the services of a broker or join an exchange that lists carbon trading products such as allowances.

You may also “borrow” allowances from the subsequent year to cover any shortfall in allowances during a particular year; excess allowances may also be “banked” to the following year.

For the period 1 January 2012 to 31 December 2012, you may also use credits generated from projects established under the Kyoto Protocol flexible mechanisms, up to 15% of the quantity of allowances that you are required to surrender to account for your reported actual emissions.  There are two types of credits that you may use, and which can be acquired by purchasing through the carbon market: Certified Emission Reduction units (CERs) which are generated through the Clean Development Mechanism (CDM) and Emission Reduction Units (ERUs) which are generated through Joint Implementation (JI) projects.

For each tonne of CO2 equivalent reported for which you do not surrender an allowance you are liable to pay a penalty of €100 as required by the Directive.  Payment of this excess emission penalty however does not release you from the obligation to surrender an amount of allowances equal to the quantity of emissions for which allowances were not surrendered when surrendering allowances in relation to the following year.

Implementation Timeline

This chart gives a diagrammatic overview of the principal timeframes and deadlines related to functions that you have as an aircraft operator, including also those related to the role of verifiers and the competent authority in the compliance chain.  You should always ensure that you meet the deadlines as stipulated by the relevant legislation.