Planes on the runway

Grounded? (Source: David Jones)

The EU’s commitment to taking serious action on aviation emissions has been courting controversy of late due to its proposed inclusion of the international transport sector in the EU ETS. From 2012 all arriving and departing flights in the EU will have to be covered by corresponding emissions allowances (EUAs).

Regulating flight operators will be entrusted to individual Member States. This raises the issue of effective enforcement by countries who have a less than satisfactory track record in preventing fraud in the emissions market. Added to this is the problem of increased administration costs as levels of EUA allocations will have to be decided for a substantial number of airlines. International operators have been left feeling alienated and sceptical of the EU’s ability to direct resulting funds towards pursuing environmental goals.

Monitoring and enforcement

Each of the 27 Member States will be responsible for administering the application of the EU ETS to a number of designated operators. Once the EU Commission has decided how many EUAs will be allocated to each country, the Member States will be charged with calculating and allocating the appropriate levels of allowances to the airlines.

The number of operators within each Member State’s jurisdiction is significantly higher now that international operators are also included. While some countries have a good history of administering the allocation and trading of EUAs, in the past others have been hit by incidents of theft of EUAs from national registries and large-scale VAT fraud. The emissions market was brought to a standstill following attacks in early 2011. Competent registration and monitoring of EUAs is therefore paramount if the EU ETS is to work in its extended format.

Only time will tell if we can trust the Member States to live up to their task. The introduction of a new, centralised emissions registry at EU level from 2012 will hopefully address this concern, as managing the emissions market will no longer be within the ambit of individual Member States. However, this in turn may create its own problems of increased bureaucracy. The EU Commission could be in danger of spreading itself too thin in an attempt to regulate an overly challenging number of aviation operators.

Increased administration costs

Since Member States will have to decide on the levels of allocation to each operator, they will need to expend significant resources on analysing large amounts of unfamiliar emissions data from operators. This information is likely to be in a non-standardised format which may well differ between airlines and thus increase the administrative burden. To what extent the Member States will have the capacity to verify the accuracy of the data is also something that remains unclear.

How to achieve real results?

International operators have been complaining about the lack of transparency prevalent in the EU regarding the destination of the income raised from auctioning allowances. They are particularly worried that the revenues raised will simply be absorbed by individual Member States rather than spent on green technology R&D or emissions reductions. This is in addition to general opposition to the application of the EU ETS in a way which is perceived as illegal in its disregard for non-EU states’ sovereignty.

The combination of mistrust on the part of operators and the questionable capacity of the EU mechanisms to adequately police the extension of the EU ETS outside its territorial remit is a potentially toxic one. In reality, is it really likely that the EU will apply the ultimate sanction of excluding non-compliant operators from its airspace? Without the possibility of effective enforcement, the expansion of the EU ETS may only serve to antagonise instead of achieving environmental results.

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