Mon 9 May 2011 – Oil Price Information Service (OPIS), which publishes pricing and news updates on petroleum, launches this week what it describes as a ‘Clean Jet Assessment’ into its daily Europe Jet Fuel & Gasoil Report. OPIS says it is providing the first integrated carbon and jet fuel price mechanism for airlines joining the EU Emissions Trading System (EU ETS). As well as clean jet prices in Rotterdam and Northwest Europe, OPIS is publishing daily Emissions Allowance price levels and forward market projections for jet fuel with carbon included at the end of the year, and in 2012. The move comes as global jet fuel logistics company World Fuel Services launches a service for small to medium sized airlines and operators which bundles together physical jet fuel supply together with the appropriate number of carbon allowances they will require under the EU ETS.
The term ‘clean’ was first used in the power markets after they were included in the EU ETS in 2005, to denote the sale of energy with the cost of buying associated emissions permits built in. In simple terms, the ‘clean spread’ is the difference between power supplied with the carbon included, and power supplied without it.
From 1 January 2012, airlines must submit multiple emissions allowances or related certificates to national authorities for every tonne of jet fuel burned. According to OPIS, some major airlines have hired staff for their own carbon desks to actively trade allowances but many are seeking to comply with the new emissions system without raising their fixed costs. OPIS says that the environment and CSR manager of a major northern European airline told it: “For airlines who don’t want to actively trade carbon emissions, a clean price is perfect.”
“We’re providing this new data because our customers absolutely need it,” says Brian Crotty, President of OPIS. “Although it may feel like the deadlines for submitting allowances are in the future, fuel managers need to think ahead, and this gives them a basis for planning and purchasing as the 2012 buying season [for jet fuel] gets into high gear this spring.”
Commenting from the launch at the IATA Fuel Forum in Singaore, OPIS’s Tim Lloyd Wright said: “The response has been very good so far. The aviation manager of Europe’s largest refiner just called me to say how useful he thought the assessment was – this is a really big deal for the whole industry just now.”
The cost of the EU ETS to airlines, along with the burden of administration and the acquisition of allowances, has led global jet fuel logistics company World Fuel Services (WFS) to develop and offer clients its ‘Carbon Neutral Jet Fuel’ product. Not to be confused with alternative jet fuel, the offering is the coordinated purchase of carbon allowances as the underlying physical jet fuel is purchased and consumed.
“What makes this product ‘carbon neutral’ is that the ETS liability associated with the carbon emissions from the jet fuel is offset by the delivery of carbon allowances to the airline – and subsequently delivered by the airline to its administering member state,” explains Jonathan Leak of WFS.
With the product, an airline will contract with WFS to supply its jet fuel requirements for flight segments flying into or out of an EU airport under a modified fuel supply agreement. Beginning with the 2012 trading period, as the airline’s cumulative fuel burn reaches the threshold at which a carbon allowance is required, WFS will obtain that allowance from international carbon markets on behalf of the airline. The carbon allowances will be transferred into the airline’s national registry on a mutually agreed schedule and ultimately delivered by the airline to its administering member state the following April, as required by the EU ETS.
Leak says the larger, EU-based operators will probably invest in staff and infrastructure in order to have an emissions trading group as a normal course of business. His target customer though for the WFS product is likely to be an airline or operator that is not trading emissions internally, is short on carbon allowances for any reason and is seeking a simple, straightforward way to acquire its carbon allowances.
OPIS has created a ‘primer’ report on managing jet fuel and carbon purchasing in the EU ETS, as well as a video containing interviews with OPIS experts, Jonathan Leak of WFS and Peter Hind, Managing Director of RDC Aviation.
OPIS film and primer report
OPIS – Jet Fuel Prices
World Fuel Services (WFS)
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