Anger and confusion as many aircraft operators fail to understand 'stop the clock' or open vital registry accounts
Mon 18 March 2013 – The European Commission’s EU ETS ‘stop the clock’ proposal may have been welcome news for airlines flying intercontinental journeys to and from Europe but it has created confusion and anger amongst many smaller operators over their compliance obligations. The competent authorities of the EU member states are also experiencing headaches as a large number of operators they administer have yet to inform them whether they intend to derogate their extra-EU/EEA flights and return their allowances. Of greater importance, with the April 30 deadline a little over a month away for surrendering allowances on their 2012 intra-EU flights, many operators have still not opened registry accounts, a complex and lengthy process that is the only means of doing so. There is a mandatory fine of 100 euros ($130) per tonne of CO2 for non-compliance. Meanwhile, the UK government has started a two-week consultation on the ‘stop the clock’ proposal, which is currently in the final stages of the EU co-decision process and expected to be agreed by mid-April.
According to Mladen Vukovic, EU ETS Senior Advisor with the United Kingdom Environment Agency, which administers over 1,200 aircraft operators, of the 472 ‘active’ operators who have been contacted, 252 operators have indicated they will take advantage of the ‘stop the clock’ derogation and report intra-EU flights only and 32 will be reporting all flights (intra- and extra-EU), but the remaining 188 operators have yet to respond.
The French authority, the DGAC, reports a similar lack of response. Jérôme Lesourd, Head of the DGAC’s ETS Unit, told the Aviation Carbon 2013 conference last month that it had received only 140 responses from the 311 letters it had sent out.
Part of the reason may be that there is no legal obligation for operators to comply with the request but the exercise is meant to help the European Commission decide levels of auctioning, given the reduced number of allowances that will be required.
Of more concern is the low number of operators that have opened Union Registry accounts. Said Vukovic: “At the moment, 221 accounts have been opened, 25 of which are operators with extra-EU flights only. We are still short of 145 accounts that need to be opened as they have intra-EU flights. Of these, 62 are in the process of getting one opened and the rest – 83 in total – have done nothing and are being chased. A total of 341 aircraft operators need registry accounts as they will have reporting and surrender obligations for 2012, irrespective of ‘stop the clock’, due to intra-EU flights.
Although a number of these may have operated only extra-EU flights in 2012, Vukovic is alarmed at the low level of registry accounts being opened, which he believes is being mirrored across the EU. “Why they have not actioned this after numerous attempts to get them engaged by our registry team is anyone’s guess,” he said.
Registry accounts have to be opened in order for operators who have already received allowances and have now chosen to return them under the ‘stop the clock’ derogation. In order for those operators that have to surrender allowances in respect of their 2012 intra-EU flights, they too must open an account. However, points out Vukovic, it can take up to six to eight weeks to open an account, especially for operators located abroad. The April 30 deadline for surrendering allowances is now just six weeks away.
“There is a lot of documentation to collect, complete and send to us for validation,” he told the Aviation Carbon conference. “It should have been done yesterday. That is the only way you can avoid the mandatory €100 per tonne penalty for under-surrendering on April 30. Every EU member state has its own national legislation regarding penalties for not submitting an emissions monitoring plan but the one penalty that is common to all is this one.”
Why are so many registry accounts remaining unopened? “I would think it is a combination of several factors: the general opposition to the ETS, the complexity around the opening of accounts and the non-legally binding ‘stop the clock’ letter,” believes Vukovic. “My concern, especially with the smaller operators, is the feeling that ‘stop the clock’ for them has been mistaken to mean that the ETS is paused for a year and they do not have to do anything.”
Julien Dufour, CEO of VerifAvia, which is currently verifying around 500 operators reporting to 24 different EU competent authorities (CAs), reports he has received numerous emails and calls from operators confused and frustrated over the issue. Apart from a few authorities, he said there is a general lack of information and advice over both ‘stop the clock’ and registry accounts. He added there was one CA who he had been unable to contact by either phone or email for five months.
“Most operators still do not have an open registry account and many of them do not know or do not understand that they have to open a registry account,” he said. “There is a major difference of treatment between operators reporting to the UK and Germany, who receive regular updates about the EU ETS in general and about the requirement to open a registry account in particular, and operators reporting to other member states. It appears that some CAs have not even informed their operators of the need to open a registry account.”
Apart from the misunderstandings, Dufour said there were other issues that particularly affected smaller operators. Because of the detailed personal, financial and company background information required to open an account, privacy and confidentiality were major concerns to many business jet operators, with some threatening not to comply. He also reports the disparity in the cost of opening a registry account. Although the process is free of charge in most EU member states, Dufour cites a complaint by one operator that needs to surrender allowances to cover 14 tonnes of CO2 – a value at the current price of carbon of around €70 ($90) – but was being charged €3,460 ($4,500) by the French national registry administrator to open an account. Similarly, the subsistence fees charged by the UK Environment Agency are of a similar level.
And smaller operators are not the only ones unhappy at the current direction of the EU’s carbon scheme. “Please give us some rules and do not change them,” Hubert Corpechot, Fuel and Carbon Trading at Air France, pleaded of EU regulators at the Aviation Carbon conference. “Currently, airlines have doubts about the legal certainty regarding their obligations for 2013 emissions. Predictability is essential for operators to determine the number of allowances they will need to acquire for 2014 compliance.”
He said ‘stop the clock’ had been beneficial in lowering Air France’s overall EU ETS costs, “although not by much”, but it had created more uncertainty about entering the carbon markets. “We do not know what to do about 2013 – and we don’t have a clue about 2014 either,” he added.
Andrew Pozniak, ETS Project Director at Avocet, which advises operators on EU ETS compliance, said: “'Stop the clock' has created a massive confusion amongst operators, many of whom falsely believe they no longer need to comply. Those operators are in for a nasty shock because of the automatic fine. It’s not too late for them to comply but it’s clear to see that the EU has no real choice but to ‘stop the clock’ for everyone for the next few months until this is sorted out.”
Despite a final EU decision not having yet been reached on the ‘stop the clock’ proposal, the UK government through the Department of Energy and Climate Change (DECC) has today opened a short consultation asking stakeholders for views on the temporary suspension regarding extra-EU flights. The consultation runs until April 1.