Sceptre International Group News | Airlines "broadly happy" with carbon credit allowance

Over 212 million credits will be divided between aircraft operators when the sector enters EU emissions trading scheme in 2012

The European Commission has decided on the amount of carbon credits it will issue to aircraft operators when they enter its Emissions Trading Scheme (EU ETS) next year, securing luke warm approval from airlines who said the distribution of allowances had been set at “an acceptable level”.

Around 4,000 operators flying in and out of Europe will be forced to enter the emissions cap-and-trade scheme and required to adhere to emissions targets or buy additional carbon allowances to cover any excess emissions.

The Commission confirmed yesterday it would divide allowances worth 212,892,052 tonnes of emissions between airlines in 2012, falling to 208,502,525 tonnes from 2013 onwards. This means the industry cap will be second only to power generation.

Just over 80 per cent of the allowances will be given free to aircraft operators, with a further 15 per cent auctioned and three per cent set aside for distribution to new entrants. Revenues from the auction will be invested in climate-related projects, the commission said.

The announcement was slightly delayed as Eurocontrol, the European Organisation for the Safety of Air Navigation that carried out research into the level of airline allowances, took more time than expected to complete its analysis of the industry.

Leaked figures had suggested the overall amount of credits available to airlines would be lower than the total confirmed yesterday. Consequently, a spokesman for industry body the Association of European Airlines (AEA) told BusinessGreen that, in this respect, he was happy with the amount of credits to be released.

However, he said the industry remained “confused” that flight activity in 2010 will be used as a benchmark to divide the credits between operators when several airlines were grounded for almost a month as a result of the Icelandic ash cloud.

Individual airlines will hear how many allowances they have been allocated by the end of September, but the spokesman said operators feared the distribution would be skewed against those firms that had to ground planes, meaning those who were not disrupted by the ash cloud will receive a disproportionate amount of credits.

The Commission dismissed these concerns, saying in a statement that it had “not seen data” to suggest the ash cloud would impact on the distribution of free allowances.

“Redistribution might occur if certain airlines had to cancel a greater proportion of flights then others, while the vast majority of operators have been impacted by the flight restrictions resulting from the volcanic ash cloud,” it added. “Indeed all the estimations that we have seen confirm that distributional impacts are very small.”

Changing the benchmarking year would require a change in legislation. “Adopting such legislation usually takes two years and there are no plans to start this process,” the Commission statement said.

The EU took the decision to bring the sector into its market mechanism after a global solution to tackle rising emissions across the industry failed to materialise.

The commission reckons placing a cap on aviation emissions below the average level in 2004-2006 will save 183 million tonnes of CO2 emissions a year by 2020, a 46 per cent reduction compared with business as usual, and equivalent to double Austria’s annual greenhouse gas emissions from all sources.

However, the plan remains highly controversial and is the subject of several legal challenges from airlines that are expected to be decided by the European Court of Justice.

The Commission statement said the airlines engaged in law suits had agreed to comply with the legislation until a ruling had been made.

Source: Will Nichols

Sceptre Group Limited is a specialist investment firm focused in low carbon financial investments such as sustainable biofuel plantations, agricultural farmland and green technologies.  For more information on Carbon Credits & Carbon Credit Trading, please visit Sceptre International Group’s website at www.sceptreinternational.com.

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