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Ash cloud's aviation CO2 silver lining has implications for airline EU ETS emissions allowances

Ash cloud's aviation CO2 silver lining has implications for airline EU ETS emissions allowances
Mon 26 Apr 2010 – Whilst the Iceland volcano ash cloud has cost the airlines $1.7 billion, according to IATA, around 1.67 million tonnes of CO2 emissions were saved by the grounding of scheduled flights within Europe, estimates consultants RDC Aviation. Figures from Eurocontrol show that between Thursday 15 April to the following Thursday, 22 April, 114,671 flights operated within European airspace compared to 188,514 in the previous week, with the agency estimating a higher overall saving of 2.5 million tonnes of CO2 emissions (Figure 1 below).
 
However, the loss of the emissions will not be entirely welcomed by a number of airlines as 2010 is the benchmarking year for aircraft operators entering the Aviation EU Emissions Trading Scheme and airlines most affected by the ash cloud groundings could lose out in their allocation of free emissions allowances.
 
A detailed analysis by consultants RDC Aviation, which monitors the CO2 emissions of airlines entering the Aviation EU ETS, shows that scheduled air carriers saved around 530,000 tonnes of fuel and 1.67 million tonnes of CO2 between April 15 and 22 through the grounding of flights (Figure 2 below). The consultancy estimates total fuel cost savings at nearly $400 million.
 
RDC Aviation based its analysis on the airlines’ flights originally scheduled during the groundings period. The figures cover arriving and departing flights affected by the closures within European airspace. They do not include non-scheduled operations and flights affected originating outside of closed European airspace during the period.
 
To some extent, the savings in aviation CO2 emissions will be offset by stranded passengers who used alternative means of transport to get to their destinations, and extra flights have been put on by some airlines to alleviate the backlog. The Iceland volcano itself was estimated to be emitting between 150,000 and 300,000 tonnes of CO2 a day.
 
Not only have those airlines affected by the week-long ash cloud groundings lost considerable revenue during what was already a difficult period, they also stand to lose out financially further down the line when free allowances under the Aviation EU ETS are allocated. 2010 is the benchmarking year in which the allocation per carrier will be calculated, related to their reported Tonne Kilometre (TK) data over the course of the year. Basically, therefore, the higher an airline’s emissions in 2010, the higher potentially their allocation of free allowances.
 
As a result, there will be airline winners and losers from the ash cloud groundings (Figure 3 below).
 
“For the large carriers operating into the United Kingdom, Germany and France, there will be a marginal difference in the proportion of Revenue Tonne Kilometres operated in the month of April. Over the course of the year, it may well balance out if aircraft are operated at higher loads as passengers are repatriated,” said Peter Hind, Managing Director of RDC Aviation.
 
“It looks as if the southern European airlines, particularly Iberia, TAP Portugal and Alitalia, whose airspace was closed for a shorter period of time, will gain more free emission permits as a result of the volcanic activity.”
 
Stig Schjolset, an analyst at Point Carbon Trading Analytics, concurred and said it was clear the impact will vary across Europe, with southern and central Europe the least affected. A Lufthansa spokesman told Point Carbon News that it was too early to measure the impact but acknowledged northern Europe and Germany had been affected particularly hard by the groundings.
 
The ‘winners and losers’ scenario is another example of ‘competitive distortion’ which many in the airline industry have said is a weakness of a regional emissions trading scheme applied to an international cross-border industry.
 
International airline trade body IATA has not been slow to point this out, with Director General Giovanni Bisignani telling the New York Times last Thursday (April 22) that there may be a need to postpone aspects of the Aviation EU ETS regulation.
 
“We’ve seen such a dramatic level of reduced capacity as a result of the crisis that the data this year won’t be representative,” he told the newspaper.
 
Europe’s Climate Commissioner Connie Hedegaard rejected Bisignani’s suggestion, telling the NYT: “Although I know it’s a difficult situation for the airlines, I think that it is not an appropriate excuse for saying, ‘Why should we not be excluded here?’.”
 
She said the group had always argued against the EU ETS legislation and was now trying to find a new argument.
 
However, the New York Times reports a statement by the European Commission that concedes the reduction in flights caused by the ash cloud could result in small changes in the distribution of free allowances between aircraft operators. “However, any such impacts are likely to be tiny as most operators have been impacted by the flight restrictions,” it said.
 
An IATA spokesman said 2010 was turning out to be an “extraordinary” year for European aviation and European airlines were already recovering the most slowly from the international financial crisis, with traffic levels below what would be expected.
 
“As 2010 is meant to be the baseline year for aviation and the EU ETS, these extraordinary conditions should be taken into account,” he told GreenAir Online. “One option would be to delay, another would be to make adjustments. Regardless of the methodology, there needs to be some consideration.”
 
 
Links:

 

Figure 1
 
 
Daily comparison of flights grounded by ash cloud in European airspace (source: Eurocontrol):
 
*Same day previous fortnight
 
 
 
Figure 2
Reduction in operations arriving or departing closed European airspace. Excludes non-scheduled operations and flights affected originating outside of closed European airspace (source: RDC Aviation):
 
 
 
Figure 3
Analysis of Top 50 airline Aviation EU ETS flights during April excluding non-EU ETS flights (source: RDC Aviation):
 


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