Effects of european emissions trading system application to non EU airlines.

Abstract

The European Union requires the application of an Emission Trading System (ETS) to all the flights arriving to or departing from EU airports beginning on 1 st of January 2012, according to the rules published in the Directive 2008/101/EC. Although actual emissions trading will take place in 2012 and on, part of the regulation started to be applicable in January 2010, in order to gather airline data that will be used for distribution of free emissions permits and for establishing the number of permits to be auctioned. EU carriers will have almost every flight included in the ETS, but non EU airlines participation will be limited to flights touching one EU airport, representing a relatively small part of their route system. However they are subject to the same administrative requirements, being obliged to submit Monitoring, Reporting and Verification (MRV) procedures to the EU Authority corresponding to the country with the most emissions from that carrier. This paper explores some of the most likely consequences for non EU carriers, coming from the entry into force of the ETS, both during 2010 and after 1 st of January 2012, when the system will start to be applicable. These effects may be classified in six categories: - strategies to obtain the maximum number of free permits in the first distribution, to be made on 2010 traffic basis - participation in the CO2 auctioning or other carbon markets elements, as a way to obtain additional permits when needed - other Kyoto Protocol tools for achieving additional permits (Joint Implementation, Clean Development Mechanisms) - fuel savings policies to minimise the number of permits needed since 2012 - new schemes for route evaluation, considering the repercussions of ETS - general planning (fleet and network) including carbon accounting As a conclusion it is shown that ETS application will have some unavoidable economic penalties and a non desirable administrative burden but, may offer a number of possibilities for minimising the negative effects of those measures and obtaining competitive advantages if airlines take early measures and elaborate the planning tools with enough anticipation.