Aircraft operator hit with half a million euro EU ETS non-compliance penalty as EU states send out enforcement notices
Mon 24 Feb 2014 – As part of a coordinated process across EU member states, notices have been sent to airlines and business jet operators that failed to comply with Aviation EU ETS regulations in 2012. One Europe-based commercial business jet owner is understood to have received a penalty from the UK authorities amounting to nearly half a million euros for failing to surrender the required number of allowances by the 30 April 2013 deadline. Each member state has legislated differently on enforcement and the UK has chosen a tiered approach, serving notices on just a handful of operators for now, whereas others have sent notices to all non-compliant operators. In a looming test of political will, some EU authorities are faced with enforcing penalties on Chinese, Indian and Russian operators that carried out intra-European flights in 2012 but failed to comply with the EU ETS ‘Stop the Clock’ regime.
Although the European Commission has reported that aircraft operators responsible for 98% of all aviation carbon emissions covered under the scheme in 2012 complied, the ‘Stop the Clock’ derogation, which temporarily suspended the obligation to report intercontinental flights to and from Europe, has made it difficult to ascertain how many operators failed to comply. Member state’s Competent Authorities (CAs), responsible for administering the scheme, have been reluctant to disclose such information.
Member states have an obligation to issue fines of €100 ($140) for every tonne of CO2 an aircraft operator fails to submit an allowance to cover. “It is not possible for member states to simply waive statutory penalties for political expediency and at some point soon all non-compliant operators will have to be ‘named and shamed’ under EU rules,” said Barry Moss, CEO of Avocet Risk Management, a specialist in Aviation EU ETS compliance.
In addition to fines, some states like the UK have the ultimate right of aircraft detention, seizure and sale in the event of non-payment of fines, said Moss.
EU states are also under pressure to act from EU politicians unhappy at what they see as ‘feet-dragging’ over the issue. At a recent session of the European Parliament’s environment committee, senior MEPs demanded states take immediate steps over non-compliance, threatening to derail current trilogue negotiations with states over future plans for the Aviation EU ETS if action was not taken (see article).
Although it is unclear how many operators failed to comply with 2012 requirements, all operators carrying out intra-European Annex 1 flights were required to open an Aircraft Operator Holding Account (AOHA) and information on the verified emissions of each operator and allowances submitted to cover them is available on the EU Transaction Log (EUTL).
“What we do know from the EUTL is that out of the 422 operators listed under the UK section of the log, at least 40 operators, including two airlines, appear to have failed to either submit an emissions report or surrender sufficient allowances for 2012 emissions by the 2013 deadlines,” reported Moss. “The actual default rate will no doubt be much greater as in many instances the EUTL has either not assigned a compliance category to many operators or else records under the log simply do not match up.”
He points out the UK’s Competent Authority, the Environment Agency, has put a lot more effort and resources into compliance compared to those in other member states. “It is said that in some EU states, the default rate is close to 50% but because of the lack of public domain information, we have no way of independently verifying the actual figures.
“In addition, there are hundreds of aircraft operators that simply do not appear on the EUTL for the simple reason they have not opened an AOHA. The EUTL lists around 1,280 operators, whereas the latest list of operators published by the European Commission runs to around 3,750 operators. Whilst many operators took advantage of ‘Stop the Clock’ – or may not have flown into Europe during 2012, may be exempted for other reasons or just not in existence anymore – there is a big difference in the numbers.”
Moss said it was understandable that CAs are looking to rid themselves of the administrative burden of regulating over 2,000 small operators that emit less than 1,000 tonnes of CO2 per annum, which make up most of the defaulters. Exemptions for non-commercial operators falling within that category are being considered in the trilogue discussions.
In the case of the aircraft operator receiving a penalty notice from the UK authorities for just under €500,000 ($680,000), it is understood the operator purchased the required number of allowances but failed to surrender them before the 30 April deadline. When the operator tried to log into the Union Registry early May, it found the system was no longer allowing the surrender of allowances.
“Over the past few months, several operators reporting to Germany have also received a penalty warning from the DEHSt, the German CA, mostly for totally insignificant errors,” reported Julien Dufour, CEO of Verifavia. “For example, one operator failed to surrender a carbon allowance because of a rounding issue, and was told that it faced a €100 penalty. However, in all these cases, it seems that the relevant Competent Authority would accept a waiver of the penalty in a case where the operator can demonstrate that the non-compliance is due to a genuine error.”
Meanwhile, Airlines for America (A4A), the trade association for US airlines, has distanced itself from a Reuters report last week in which US airlines appeared to call for a waiver of penalties for 2012 non-compliant operators.
“We are not seeking relief from enforcement for the 2012 or other early obligations. We are seeking clarification that the deadlines for the full, extraterritorial application of the EU ETS will not kick in for the 2013 flights while the European Parliament and Council consider a potential extension of ‘Stop the Clock’,” Nancy Young, A4A’s Vice President, Environment, told GreenAir.
She added A4A’s members had complied fully with the EU ETS since the scheme’s inception. “While we continue to question the EU’s application of the ETS to airlines in international flight absent agreement with the State of registry under any circumstances, we have not challenged the intra-EU application of the scheme and our carriers complied under the terms of ‘Stop the Clock’.”