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EUROPEAN UNION EMISSIONS TRADING SCHEME (ETS)

What's Involved in the EU's Emissions Trading Scheme

Since its formation, the European Union (EU) has been considering options for an environmental program
applicable to aviation. EU policymakers have settled on and are moving toward implantation of a plan for aviation
known as the Emissions Trading Scheme (ETS).

The information enclosed here is provided to keep CBAA Members updated on the EU's ETS plan and its impact on
international operations.

A Brief History of the EU ETS

On October 24, 2008, the Council of the European Union (EU) adopted Directive 2008/101/EC which amends
Directive 2003/87/EC to incorporate all flights by eligible aircraft arriving at or departing from EU airports in the
EU Emissions Trading Scheme. Operators of fixed or rotary-wing aircraft over 5,700 kg (12,566 pounds) who fly to,
from or within EU countries will be included in the EU Emissions Trading Scheme starting in 2012 (with
compliance requirements, explained in greater detail below, that must be met prior to the 2012 date). There is an
exemption for commercial aircraft operations which have fewer than 243 flights per period for three consecutive
four-month periods or flights with total annual emissions lower than 10,000 metric tons per year.

EU countries are tasked by this Directive 2008/101/EC to create laws which implement this change to the ETS. The
UK has led this charge as the first country to release draft legislation implementing the EC directive. Other EU
states will be coming on line with their own programs that are expected to mirror the UK’s and will indicate to the
operator which of the EU states will be responsible for administering an individual operator's ETS. No operator
should have to deal with more than a single state authority at one time as these programs develop in compliance with
the law.

If the plan is implemented in its current form, operators will be regulated by the country to which Eurocontrol air
traffic figures show they operate the most. The European Commission has released a preliminary list of aircraft
operators and the administering countries to which they would report based on European flight activity in 2006. If a
given Company is not on the EC list, it must still be in compliance with the directive. Some Operators have already
received letters from the various national environmental or climate change agencies informing them of the
forthcoming compliance requirements.

Canadian operators may in the future be regulated by Canadian law which governs carbon emissions. Should the
European community find such a law a suitable alternative to the EU ETS for Canadian operators, those operators
might not need to comply with the EU ETS. However, until that declaration has been made, operators should expect
to comply with the EU requirements.

What's Expected of business aircraft operators?

Emissions Monitoring and Reporting

If the EU ETS ultimately applies to Canadian operators, participation in monitoring emissions is compulsory for
aircraft flying to or from European Union country airports. Operators are required to submit a plan to monitor
emissions (the emissions plan) by August 31, 2009 to the appropriate regulatory authority for approval. The
European Commission is meeting to create a monitoring template which is expected by April 15th. From that
template, each EU country can create its own template for dissemination and operator use. In 2010, operators must
then monitor their emissions in accordance with their approved emissions plan and then submit a verified report of
those emissions to the regulator by March 31, 2011. Emissions reporting means calculating carbon dioxide
emissions from fuel usage. Broadly, the calculation will be fuel consumption multiplied by an emission factor for
each flight and for each fuel.

Application for a Free Allocation

The draft regulations set out what an operator must do if it wishes to apply for a free allocation. This is a voluntary
system and operators that do not wish to apply for a free allocation are not under an obligation to do so. Accordingly
there is no sanction for not applying for a free allocation, though an operator may incur a civil penalty if it submits
false or misleading statements in its application.

Operators who wish to apply for free allowances will need to submit a plan (the benchmarking plan) to the regulator
by August 31, 2009. This plan will set out how the operator plans to monitor metric ton-kilometer data in 2010. The
Directive provides that 2010 is the benchmarking period for the free allocation of allowances for both 2012 and
2013-2020. It also explains how activity data is to be calculated: the weight of passengers (actual weight plus
luggage or a default value of 100 kg for each passenger may be used [100 kg per passenger includes their luggage])
plus cargo (freight and/or mail) carried multiplied by the distances over which it was carried (great circle distance
[km] + 95 kilometers). This metric is already used in aviation industry for other purposes.

Following the approval of the benchmarking plan operators that wish to apply for a free allocation must monitor the
data in 2010 in accordance with the plan and relevant European legislation. They must then submit a verified report
of their emissions to the regulator. As stated above, this is a voluntary requirement and there is no penalty for failing
to submit a benchmarking plan. If an operator does not receive a free allocation, they will be required to buy all of
the allowances to cover their carbon dioxide emissions from the market when the requirements to surrender
allowances start in April 2013 for emissions during the year 2012. Existing operators should be aware that if they do
not apply for a free allocation they will not receive any allowances for the first two phases of the scheme for
aviation. This means that they will not receive a free allocation before 2020.

Emissions Trading

Inclusion of aviation activity in the EU ETS requires operators to account for their greenhouse gas emissions over a
given year. At the end of that year, the aircraft operator must have enough CO2 credits for the fuel burned on flights
to, from and within EU countries in the year. An operator has three sources to account for its carbon emitted: free
allocation credits, credits purchased on the open market and carbon offset credits. The free allocation credits from
the benchmarking process, carbon offset credits up to 15% of emissions, and if necessary, the purchase additional
credits from the market are used to account for the operator's emissions in that year. In the event the operator has a
surplus of credits at the end of the year, the surplus is sold back to the market.

Non-compliance

These obligations are mandatory and civil penalties will be imposed where operators fail to comply. The UK has set
substantial monetary penalties for non-compliance, up through the impounding of aircraft, for not having an
acceptable plan in place with the regulating authority.

Key Dates and Activities for Compliance with the Scheme

Assuming there is not a Canadian regulation governing carbon emissions that supercedes the EU ETS, the EU ETS
requirements are as follows:

April 10, 2009


Submit contact details (title, first name, last name, job title, email address, telephone number, and aircraft
operator name) of an appropriate person within your organization who will deal with the monitoring and
reporting requirements on your operation's behalf.
August 31, 2009
Submission of carbon emissions monitoring plan.
August 31, 2009
Submission of optional benchmarking plan (for operators who wish to apply for a free allocation).
December 31, 2009
Determination of benchmarking and emissions plans.
January 1, 2010
Start of the benchmarking year for operators applying for a free allocation. This benchmarking year is the
first and only benchmarking year out to 2020.
January 1, 2010 and every year thereafter
Start of the first emissions monitoring year. Please note however that 2012 is the first monitoring year for
which operators must surrender the correct number of allowances to cover their carbon dioxide emissions.
Allowances must be surrendered on Registry accounts by April 1, 2013. This will be covered by the second
set of regulations due to come into force before February 2, 2010.
March 31, 2011
Deadline for submission of verified benchmarking data for applications for free allowances.
March 31, 2011 and every year thereafter
Deadline for mandatory submission of verified emissions data for 2010.
June 30, 2011
Closing date for Member State to submit applications for free allowances to Commission.
September 30, 2011
Commission produces benchmark number for calculating emissions.
December 31, 2011
Regulator publishes final allocations to each operator.
February 28, 2012
Regulator issues allowances to operators.
December 31, 2012
End of first emissions reporting year for which allowances must be surrendered by operators. Submission
of first verified emissions report.
April 1, 2013 and every year thereafter
Operators surrender the correct number of allowances from their Registry accounts to cover their carbon
dioxide emissions.

EU Emissions Trading Scheme Resources

• http://nbaa.org/member/ops/environment/eu-ets/20081119-ec-directive-2008-101-ec.pdf
(113KB, PDF)
• http://nbaa.org/member/ops/environment/eu-ets/20090211-ets-administering-states.pdf
(235KB, PDF)
http://nbaa.org/member/ops/environment/eu-ets/20090211-ets-administering-states.xls
(241KB, Excel)
This list is not inclusive of all operators, rather it includes those already identified by
Eurocontrol and the European Commission.