Aviation focus, September 2012, Volume II Issue II
1. September 2012
Published by Evolution Markets and Climate Connect [Volume II, Issue II]
Aviation CLIMATE
focus
CONNECT
ENVIRONMENTAL NEWS FROM AVIATION
Important: EU Regulatory Updates
1. US Senate Panel: Bill passed to block EU law
2. European Commission releases Update to EU-ETS Directive
2003/87/EC - notable change is raising the Small Emitter
Thresholds from 10,000 t/Co2 annually to 25,000 t/Co2
annually
3. EU releases new Monitoring and Reporting Regulation for
Aircraft Operators – MRR Guidance Document No. 2
4. UK and France releases requirements and guidance for new
Phase III AE Monitoring Plan
5. Alert: France issues second notice to assigned operators to
submit 2011 emission report
6. New document released - Small Emitter Guidance emission
template – Phase II & III
EUA and CER Price Development
EUA/CERs/Fuel Price Index
(Source: Evolution Markets)
Jet Fuel Price as on August 31, 2012:
$134.0/barrel
(Source: IATA)
2. September 2012
Aviation
focus
Exclusive Communication
On Europe-Australia Carbon Market linkage announced Que: What does linking mean for Australian businesses’ access to
international units?
on August 28, 2012 Ans: Linking will provide Australian businesses with secure access to a
broader pool of international emissions units. European allowances
Que: What are the objectives of linking EU and Australia’s Emission will be added as an eligible international unit that can be used in the
trading system? Australian scheme and Australian businesses will be able to use
Ans: A link between emissions trading systems between EU and eligible international units for up to 50 per cent of their total liability
Australia enables participants (including aviation) in one system to until 2020.
To facilitate the negotiation of a full link, the Australian Government
use units from another system for compliance purposes. Linking
is removing the price floor, as well as introducing an additional sub-
emissions trading systems provides a number of benefits including limit on the use of Kyoto Protocol eligible international units such that
reducing the cost of cutting carbon pollution, increasing market firms will be able to use these units to meet up to 12.5 per cent of
liquidity and supporting global cooperation on climate change. their annual liabilities within the 50 per cent overall limit on the use
of eligible international units. This limit will ensure that the link
Que: What is included in the linking arrangement between Australia operates effectively and provides long term price certainty for
and the European Commission? businesses investing in low emissions technologies.
Ans: The arrangement includes the European Commission seeking a
mandate to negotiate a treaty on behalf of the European Union by Que: Why is the Australian Government removing the price floor?
mid-2015 for the full linking of the emission trading systems from July Ans: Removing the price floor will simplify the pathway towards full
2018 (the Australian Government has an existing mandate to linking, and was an element of the linking package agreed between
negotiate a treaty). As an interim arrangement, a partial link will be Australia and the European Commission. By connecting Australian
established to allow Australian businesses to buy and use European and European carbon markets, linking will ensure a single price for
Union Emissions Allowances (European allowances) for compliance Australian and European carbon units. This provides investors with
under the Australian scheme from July 2015, until the full link comes long term certainty on the price of carbon pollution, which largely
into effect no later than July 2018. To facilitate these arrangements removes the need for a price floor in the flexible price period.
and simplify the path towards full linking arrangements, the
Australian Government will not proceed with the implementation of Que: What is the likely impact of linking on Australian airlines?
its price floor and will limit the use of Kyoto Protocol eligible Ans: The Australian Government introduced its Clean Energy
international units under the Australian scheme. In addition, Australia legislation last year, which created a carbon price system (CPS)
will set its price ceiling with reference to the expected 2015-16 price effective from 1 July 2012. This will have a cost impact to the airlines
of European allowances. as well along with the EU ETS compliance (Airlines flying on EU’s
International routes). For e.g. Qantas will have an estimated cost
Que: Why link the Australian and European systems? impact of approximately $75.7 million for Qantas mainline and
Ans: Linking the Australian and EU systems benefits both parties and Qantas Link in the financial year ending 30 June 2013 (excluding
provides an example of how, through international cooperation and Jetstar).
the use of markets, countries can work together to reduce carbon
pollution. The linking means that Australian airlines will now be eligible to meet
The arrangement represents the first step towards linking the their obligations through purchase of European allowances and offset
established carbon market in Europe with developing carbon markets certificates from 2015 onwards. Removal of floor price in the
in the Asia Pacific. Together, the linked Australian and European Australian scheme means that airlines will be able to purchase
emissions trading systems will be the world’s largest carbon market international offsets at around A$10, which is lower than the earlier
and a major driver of the global transition to a low carbon economy. floor price of A$15. Aviation industry welcomed the move as it will
By connecting markets that would otherwise be isolated, linking will streamline an earlier complicated process of compliance to two
create a more liquid carbon market that reduces carbon pollution at a separate emission reduction systems.
lower cost. A more liquid carbon market will offer a more stable
carbon price signal. It also provides businesses with more Que: What is the likely impact of linking on other airlines?
opportunities to trade, as businesses with excess units will have Ans: The linking means from 2015 Australian companies will be
access to more buyers and businesses that need more units can allowed to start buying European allowances which is expected to
purchase them from a wider range of sellers. drive the prices up. However, this is an opportunity as well for airlines
and entities which can generate allowances and then sell them in the
Que: What will a full link between the Australian and European linked prices. Australia is expected to act as an additional demand
systems mean? center for international offsets.
Ans: A full link will further integrate Australian and European carbon
markets by allowing businesses to use carbon units from Australia or This could be considered as a move towards achieving the objective
Europe for compliance under either system. The European to have global common Carbon measurement mechanism for the
Commission and Australia have identified a number of policy matters Aviation Industry; linking Australia and EU ETS means lower cost of
to be considered before full linking is established including: abatement of carbon pollution and simply integrating the efforts
Measurement, reporting and verification arrangements; involved to fight a common global concern of Climate Change.
The types and quantities of third party units that can be
accepted into either system;
The role of land-based domestic offsets from Australia’s
Carbon Farming Initiative in the linked system; Note: Adapted from the FAQs published by EU and Australian Authorities
Any implications for supporting the competitiveness of
European and Australian industries, in particular for sectors 2
exposed to a risk of carbon leakage and comparable market
oversight arrangements.
3. September 2012
Aviation
focus
News & Updates
EU ETS, Australia carbon scheme to link by 2018, EU ETS Aviation amendments to reduce compliance cost of
floor price dropped small operators
Climate Connect News, 28 August 2012, London: The EU and
Australia have formally agreed on the principles of linking the
carbon emissions trading schemes in the two regions. The
Australian carbon pricing scheme will undergo significant
changes in order to facilitate the linkage. The cap-and-trade
scheme, set for implementation from July 2015, will not have a
floor price. Additionally, to incorporate the supply of EUAs into
the Australian scheme, a sub-limit for Kyoto certificates will be
implemented which will restrict the use of CERs, ERUs and RUs
to 12.5% of an obligated companies’ emissions reduction target.
The Australian scheme, however, would continue to have a
ceiling price, expected to remain in force till June 2018. This
ceiling price, which was earlier A$22.1 per tonne above
international carbon prices, will now be based on expected
2015-16 price of European units.
Climate Connect News, 21 August 2012, London: The recent
The Australian Minister for Climate Change and Energy
amendments in the EU ETS Aviation regulations are expected to bring
Efficiency, Mr Greg Combet said, "Starting today, Australian
significant relief to small aircraft operators with annual emissions of less
liable entities can purchase EU allowances for future compliance
than 25,000 tonnes. The European Union has raised the threshold for
in Australia." small aircraft operators from 10,000 tonnes to 25,000 tonnes. While the
minimum threshold limit for inclusion in the ETS is still 10,000 tonnes per
Commenting on the development, Climate Connect's Chief year, the new threshold will apply to the monitoring and reporting
Analyst, Mr Nitin Tanwar said "This is the first time carbon requirements.
markets of two continents will be linked and a new demand
center for EUAs will be created; though, for the CDM market its With the increase in the threshold, a large number of the aircraft
bad news as CER demand in Australia will be significantly operators will see their administrative costs reduce significantly. The
reduced from the initial estimate of 76 million tonnes per year." amendments have been adopted due to the high administrative costs
Additionally, European installations will be able to use associated with the monitoring, reporting and verification procedures for
Australian units for compliance as soon as full linking comes into small operators.
operation, from July 2018 at the latest. An interim link between
the two schemes will be established from 01 July 2015 which The amendment has also reduced and simplified the calculation and
will be converted into a full link latest by July 2018. verification complexities of fuel density measurements. A large number of
such operators could have found it difficult to comply with the EU
“The European Union is the first regional emissions trading regulations as they would have had no or minimal experience in emission
system and spans the largest part of the European continent. monitoring.
We now look forward to the first full inter-continental linking of
emission trading systems. This would be a significant The amendments have been made after concerns that the compliance
achievement for both Europe and Australia. It is further cost for small and private aircraft operators would be significantly higher
evidence of strong international cooperation on climate change than that of the large airlines. The EU is already under considerable
and will build further momentum towards establishing a robust pressure to restrict the ETS to European airlines.
international carbon market," Ms Hedegaard said.
For more information about this article, please contact: info@climate-
The European Commission and Australia will work to agree connect.co.uk
registry arrangements for the interim link by mid 2013. The
Australian Government has agreed to enter into negotiations on
a full-linking agreement, and the European Commission will
seek a mandate to do so in coming months.
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For more information about this article, please
contact: info@climate-connect.co.uk
4. September 2012
Aviation
focus
COMAC, Boeing open research centre in China to work on Updated emissions monitoring plan issued by EU for
jet biofuel aircraft operators
Climate Connect News, 17 August 2012, London: Chinese state-
owned aerospace manufacturer Commercial Aircraft Corp. of China
(COMAC) and Boeing have opened the Boeing-COMAC Aviation
Energy Conservation and Emissions Reductions Technology Center, in
order to jointly support the growth of commercial aviation industry.
The research will be concentrated on exploring scope of refining the
waste cooking oil into sustainable aviation biofuel.
Climate Connect News, 8 August 2012, London: The European
The Boeing-COMAC Technology Center's first research project aims to Union has released a new Annual Emissions Monitoring (AEM) plan
identify contaminants in waste cooking oil which is commonly known template for airlines covered under the Aviation Emissions Trading
in China as "gutter oil," and processes to treat and clean it for use as Scheme (ETS). The EU released the new AEM plan in the updated
jet fuel. Waste cooking oil has shown the potential for sustainable Monitoring and Reporting Regulations which were passed on 21
aviation biofuel production and can be an alternative to petroleum- June 2012 and entered into force on 1 August 2012.
based fuel as the annual consumption of cooking oil in China is
approximately 29 million tons while the oil consumption in its The new excel version of AEM plan is similar to the previous
aviation sector is around 20 million tons of jet fuel. So the research & version except the addition of some new requirements regarding
development to look for the ways to convert discarded "gutter oil" procedures for data management and control activities. As a
into jet fuel can enhance regional biofuel supplies with increased result, the aircraft operators can use most of the information they
affordability of biofuel. had provided in the previous version. National Competent
Authorities in the administering states for respective airlines have
The Boeing-COMAC Technology Center, located in COMAC's new issued guidance documents and sample AEM plans.
Beijing Aeronautical Science and Technology Research Institute
(BASTRI), will work with China-based universities and research The new AEM plan requires the small aircraft operators to report
institutions to expand knowledge in areas such as sustainable risk assessment but Article 54(3) of the MRR exempts small
aviation biofuels and air traffic management that improve emitters from submitting a risk assessment when submitting the
commercial aviation's efficiency and reduce carbon emissions. AEM plan for approval. Thus the small aircraft operators can
choose not to provide the risk assessment information at the time
China is one of the world's fastest-growing aviation markets. As per of submission of the AEM plan.
estimate, the passenger traffic in China will surpass 300 million this
year and will reach 1.5 billion passengers in 2030. So there exists a It should be noted that the revised AEM plan will not be used for
very big market for aviation biofuel as all the airlines are trying to emissions in 2012. It will be used for emissions by the aircraft
reduce fuel costs as well as the carbon emissions from aircrafts. operators between 2013 and 2020. Thus the 2012 emissions will
be reported on the basis of the current AEM plan. The updated
Experts believe this R&D in aviation biofuel will accelerate the global AEM plan does not need to be verified. It has to be submitted to
push for clean jet fuels and support commercial aviation's growth by the Competent Authority for approval.
reducing its carbon footprint.
For more information about this article, please contact: For more information about this article, please contact:
info@climate-connect.co.uk info@climate-connect.co.uk
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5. September 2012
Other News Updates Upcoming Events & Conferences
USA Industry Events & Conferences
The Aviation Biofuels Development
Coalition of Environmental groups approached Obama to stop
Airline Emission Trading protest – A groups of 11 environmental Conference
groups, is calling on President Obama to stop Congress from 02-03 Conventions Pavilion at Rio+20
Rio October, 2012
protesting a requirement that U.S. airlines trade carbon emissions 13-22 June 2012
Embassy Row Hotel
on flights to and from European countries. Washington DC,(Rio de Janeiro), Brazil
Rio de Janeiro US
Company & Deals
DHL Express Posts Record Increase in CO2 Efficiency – DHL The Rio Conventions
The Aviation Biofuels Development Conference is custom built to
Express achieved record improvements of CO2 efficiency with meet the specific challenges facedPavilion at Rio+20 is fuel
in the alternative aviation a
results up 21 per cent in 2011 compared to 2010 for its Express collaborative outreach
market to address the cutting edge topics such as:
division in Asia-Pacific. activity of the Secretariats
Develop Long term Partnerships & Alliances
Policy Focus of the Rio Conventions
United Airlines Sustainability Report: Airline 2.3% Less Fuel
(UNFCCC, UNCCD and
Understand the Feedstock and Technology options
Efficient than in 2010 - In 2010 the company used 0.155 gallons
of fuel per revenue ton mile, and in 2011 this figure increased Infrastructure and supply chain)developmentl o b a l
CBD , the G
to 0.159. Scale up and Commercializationo n m e n t F a c i l i t y
E n vi r
For more details ( G E F) , a n d 2 5 o th e r
Airbus wins $7-billion Philippine Air order - Airbus won a $7-
international, national and local partners. It aims to
billion (U.S.) order from Philippine Airlines, beating Boeing. ICAO “Assistance for Action – Aviation and Climate
Philippine Air plans to buy up to 100 new jets in total within the promote and strengthen synergies between the Rio
next five to seven years as it restructures operations to become Change” Seminar
Conventions at implementation levels by providing a
a low-cost carrier and regain dominance of the local market coordinated platform for awareness-raising and
from arch-rival Cebu Air Inc. 23-24 October, 2012
information-sharing about the linkages in science, policy
ICAO Headquarters
and practice between biodiversity, climate change and
Fuel Efficiency Montreal, Canada
combating desertification/land degradation.
Virgin Atlantic - After posting £80M loss, Virgin Atlantic aims to
trim fuel costs with new technology platform, aims 30% cut in
carbon emissions by 2020 using OSyS tool. For more details
The Seminar will provide States and other stakeholders with an
Biofuel ATW Eco-Aviation Conference
Lufthansa looking at palm-based biofuel to reduce carbon opportunity to exchange views and information on the assistance
20-21 June 2012
footprint - A total number of 1,187 flights had been carried out required to develop and implement policies and actions related
Washington, USA
using 1,157 tonnes of biofuel blend and saved 1,471 tonnes of to international aviation and climate change.
carbon dioxide emission.
For more details ATW's 5th Annual Eco-
United Airlines has joined the Sustainable Aviation Fuel Users Aviation Conference
Group, an industry working group that aims to accelerate the will look at the strategies
development and commercialization of aviation biofuels. and technologies being
implemented by the air
07-09 November, 2012
Airbus inked a deal with the Beijing-based Tsinghua University transport industry as it&
to propel the commercialization of aviation biofuels. Melbourne Convention
strive to create a greener,
Exhibition Centre
China Eastern Airlines joins Airbus Clean Jet-Fuel Network s u Melbourne, Australia e .
stainable f u tur
Plans. Attendees to this event i
nclude high-level
Carbon Emissions Carbon Expo Australasia 2012 will be a high-level market in
executives in the airline industry and those interested event
FedEx raises the target to reduce by 30% aircraft emissions by that brings Australian business the air transport industry.
supplying eco-solutions to leaders and their international
2020. counterparts together –the financial premiumof higher fuel
Sessions will cover this will be a impact networking event
as well as a source for the latest information more efficient
and higher taxes; the drive towards concerning carbon
Green Fund to help cut carbon emissions in China's Civil infrastructure and operations; a holistic industry
reduction initiatives, and the provision of low-carbon economy
Aviation Industry.
products & services throughout Australasia.
For more details
5
6. September 2012
Aviation
focus
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