Transcript JONESDAY sample

EXECUTIVE ROUNDTABLE SERIES
KEY LEGAL CONSIDERATIONS GOVERNING
THE NEXT GENERATION AIR TRANSPORT SYSTEM
Aviation in the EU Emission Trading Scheme
Sophie Hagège, M&A Partner
June 3, 2010
EU ETS Legal Framework







Started on January 1, 2005 (test Phase I)
Phase II covers 2008-2012
Covers more than 10,000 industrial installations within the EU (mostly
energy, iron, cement, glass, ceramics , pulp, paper and board)
Each industrial operator receives EU Allowances from its member state
corresponding to its emission reduction targets
Obligation to surrender a number of EU Allowances (EUA) corresponding
to actual emission level for the previous year
If actual emissions are higher, the operators can either buy EUA or face a
penalty of Euro 100 per ton of CO2 exceeding their annual targets and
exceeding emissions are added to the reduction obligations for the
following year
Phase III energy package: reductions of GHG emissions by 20% or 30% in
the event an ambitious agreement is reached on Kyoto II
EXECUTIVE ROUNDTABLE SERIES
Aviation in the EU ETS - Legal Framework
 Directive 2008/101/EC of the European Parliament and of the Council of
November 19, 2008 amending Directive 2003/87/EC so as to include
aviation activities in the scheme for greenhouse gas (“Directive
2008/101”)
 Commission Decision of April 16, 2009 amending Decision 2007/589/EC
as regards the inclusion of monitoring and reporting guidelines for
emissions and tonne-kilometre data from aviation activities
 Commission Decision of June 8, 2009 on the detailed interpretation of the
aviation activities listed in Annex I to Directive 2003/87/EC of the
European Parliament and of the Council
 Commission Regulation (EC) No 748/2009 of August 5, 2009 on the list
of aircraft operators which performed an aviation activity listed in Annex I
to Directive 2003/87/EC on or after 1 January 2006 specifying the
administering Member State for each aircraft operator (“Regulation
748/2009”)
 Transposition deadline by EU member states: February 10, 2010
EXECUTIVE ROUNDTABLE SERIES
Scope
 Airline operators of flights to, from and within the EU whatever their
nationality (i.e., either EU-based or foreign)
 The Directive will be applicable to operators or owners of passenger
and cargo flight aircrafts with a maximum take-off weight of more than
5,700 kg ("Aircraft Operators")
 Exemptions:
• military, police, customs and rescue flights
• flights on state and government business
• training or testing flights will be exempted
• commercial air operators with very low traffic levels (emitting
less than 10,000 tons of CO2/year or fewer than 243 flights per
period for 3 consecutive 4-month period)
 Each Aircraft Operator will be administered by a single member state
regarding emissions from the total of its flights to, from and within the
EU
EXECUTIVE ROUNDTABLE SERIES
Allocation of Aviation Emissions Allowances

Initial quantity of emission allowances allocated will be equivalent to
97% of the historical aviation emissions (equivalent to the average of
the annual emissions in the calendar year 2004, 2005 and 2006)

Cap to be lowered to 95% from 2013 to 2020 (this percentage may be
reviewed as part of the general review of the EU emissions trading
directive)

Aircraft Operators will receive 85% of their emission allowances for
free in 2012 (this percentage will be reduced from 2013 as part of the
general review of the EU Emission Trading Directive)

The remaining 15% will be auctioned
EXECUTIVE ROUNDTABLE SERIES
Allocation of Aviation Emissions Allowances

Allocation of emission allowances will be determined by the total
amount of ton km of an Aircraft Operator in the base year 2010 (i.e.,
product of distance and payload) and a benchmark factor

The number of emission allowances per Aircraft Operator will be
limited to 1,000,000

A special reserve of free allowances (representing 3% of overall
allowances) has been included for new entrants and very fast growing
airlines

An exemption has also been introduced for commercial air operators
with very low traffic levels (emitting less than 10,000 tons of CO2 a
year)
EXECUTIVE ROUNDTABLE SERIES
Aircraft Operators Obligations

Obligation to surrender one emission allowance for every ton of CO2
emitted on flights to, and within the EU within the mandatory deadlines

Obligations may be fulfilled by aircraft operators by:
• directly reducing their emissions
• selling and/or buying allowances on the EU market or from other
parties subject to the EU ETS
• by obtaining offset allowances under certain limits
EXECUTIVE ROUNDTABLE SERIES
Allowances Offset

Permissible use of emission credits from emissions reduction projects
(CERs from clean development mechanisms or ERUs from joint
implementation projects) under the Kyoto Protocol, up to 15% of the
number of emission allowances they are required to surrender

From 2013, permissible banking of CERs and ERUs issued from
eligible emissions reduction projects for the 2008-2012 period which
have not been used during such period to the extent provided by
article 11a of Directive 2003/87
EXECUTIVE ROUNDTABLE SERIES
Non-compliance Penalties

Penalties of €100 per ton of CO2 exceeding the annual target, and

Deduction of exceeding emissions from allowances for the following
calendar year

Publication of the names of aircraft operators in breach of requirements

At the request of a MS, the EU Commission may adopt a decision to
impose an operating ban on breaching aircraft operators if other
enforcement measures have turned ineffective
EXECUTIVE ROUNDTABLE SERIES