February 20, 2012

Even as protests continue against the European Union’s Emissions Trading Scheme (EU-ETS), implemented January 1, 2012, aviation operators outside the EU are starting to come to grips with the mechanics of compliance – an effort many U.S. operators are discovering is a major challenge.

“The carbon registry requirements being pushed out by EU member states are accompanied by a lot of rhetoric and deadlines that are coming up very soon,” explained Adam Hartley, a regulatory services team supervisor at Universal Weather and Aviation. “It’s got operators kind of panicked.”

On one hand, Hartley said, operators already participating in the EU-ETS are trying to simply track their carbon emission histories as required under the program – a requirement that took many operators by surprise, but is an essential part of the process.

“Operators are wading into a completely new and foreign process of opening a carbon registry account,” Hartley continued.

Consider the carbon registry account like a bank account, with deposits and withdrawals. EU-ETS establishes a trading scheme for carbon credits: one metric ton of emitted greenhouse gas costs one credit. The concept forces companies to pay more for higher emissions through the purchase of credits in the market. Alternatively, they can invest in technology to reduce emissions or reduce the number applicable flights to, from, or within the EU in a Monitoring Year. In order to operate in Europe, flight operators must open carbon registry accounts, allowing them to bank the carbon credits they need to pay for offsetting their emissions.

The carbon markets established for applicable EU-ETS stationary installations are operational and are actively traded. The, European Union Aviation Allowances (EUAA), will be introduced to the market later in 2012 through free allowance distribution, an EU single auction platform, and individual Member State auction platforms.

The issue is made more complex by the fact that each EU country has a slightly different set of rules governing compliance. And yet, “this program grabs everybody,” Hartley said. “If you’re doing one applicable flight to the EU a year, then you’re captured by the system and must comply.”

In most cases, operators will have to supply some amount of confidential information to establish their registry accounts. That could include the names and signatures of each significant owner of the company, articles of incorporation, company charters, documents from the operator’s secretary of state office and more. Companies and their owners may even have to submit to a background check, Hartley said. Other items likely to be requested in the course of application for a carbon registry account include the names and passports of flight crew members, along with proof of residency. In many cases, documents will have to be notarized.

With this much vital company and personal information flowing into the hands of regulators in another country, Hartley acknowledged many U.S. operators are concerned about their privacy.

“They’re not making these documents public,” Hartley explained. “These documents are going to governments that limit their use of this information to very a very specific purpose. They’re things a Freedom of Information Act request couldn’t touch.”

For those operators still uncomfortable with the notion of sending such closely-guarded information to a foreign government, Hartley strongly urged a dialogue with host country officials.

The effort of actually gathering and certifying the information requested by the European Union can also be challenging for operators.

“Anybody who has resources within their own company needs to engage them. I’m talking about the legal department, human resources,” said Hartley. For those without such resources, he said that international service providers have information on how to comply with EU-ETS and how to set up a carbon trading account.

“Member states are very good at throwing complex requirements at you, but they don’t do a great job of explaining things in understandable terms. They get caught up in the legal language, which is off-putting and often times very scary. Indeed, there are deadlines for compliance but so far, the penalties for missing them have not been defined.

What if you miss a reporting deadline?

“I wouldn’t be overwhelmed with the thought of missing a deadline,” Hartley advised. “If you’re not going to be ready, reach out to your member state and let them know you are working towards compliance. Have that open conversation instead of panicking and feeling all alone.” In the end, he said, the EU wants compliance, not punishment.

There are more tools available from NBAA, aimed at helping Members make the best possible decisions regarding compliance. Review NBAA’s EU-ETS information. Universal Weather and Aviation also has a web page devoted to EU-ETS compliance, which provides guidance for compliance with individual member states and reporting situations.