EU “Stops the Clock” on International involvement in the EU ETS, but scheme lives on for Intra-EU Flights

Following a long and drawn out battle between the EU and almost every other county in the world, the European Commission have today announced that they are advising member states to ‘stop the clock’ on the inclusion of flights that start or end outside the EU – for a period of one year. This does not apply to flights which both take off and land at aerodromes within the EU.

This was described as a gesture of ‘goodwill’, though it will no doubt be claimed as a victory by those who have opposed the scheme during this bitter dispute.

While this might sound like good news, in practice it might be the worst possible outcome for business jet operators based in the EU, as it removes the strongest legal argument against the scheme and all but guarantees that it will not be delayed or scrapped, as many hoped.

So, what does this mean for you?

If you are based in Europe, the chances are that most of your flights are within the EU anyway, so nothing will change, except a reduced cost on the occasions when you do leave the EU (note that Switzerland, the Isle of Man and the Channel Islands will presumably therefore fall outside the scope of the scheme). You still need to prepare a report in the coming months, have it verified and crucially you will still need to surrender allowances come April.

If you are a private operator based outside the EU, and fly point to point within the EU (e.g. you fly US-UK-France-US), you still need to go through the burdensome monitoring, reporting and verification process – to cover the UK-France flight.

Non-EU operators who only fly to and from the EU (e.g. you ONLY fly US-UK-US), you have no liability for 2012. This applies to 2012 only and unless an agreement is reached in the next year, you will once again become liable for 2013.

Winners & Losers

Foreign based international airlines will benefit most from this, as they burn huge amounts of fuel on flights that will now be exempt. They will also face no emissions charges for onwards travel within their home territory. This of course means that hub and spoke international airlines based in the EU will be the biggest losers.

For example, a passenger flying from Belfast to Chicago via Heathrow will still face an EU ETS charge for their flight to London. If, however, they fly to New York direct from Belfast and on to Chicago from there, they face no emissions charges at all. This has long been the elephant in the room during debates regarding the EU ETS’s application to non-EU member states.

What Next?

Technically it is not the EC who enforce the EU ETS, as it is the individual member states who are responsible for ensuring the Directive is complied with. This is done through national legislation, and therefore the EC have no power to exempt anybody from the scheme at this stage, and this announcement is simply ‘advice’ to the member states. Potentially, if the legislation in any of the member states does not allow for any discretion on the part of the regulators, it is possible that they will still require their assigned operators to comply fully with the scheme, and currently various regulators are assessing what impact this will have on them.

However, should this ‘advice’ be universally accepted, any operator exempted by this decision will now get at least one year’s grace, but should be aware that if no permanent resolution is found, they may be forced to comply in 2013, and therefore should be keeping track of their emissions throughout the next year just in case.

If you are an operator who is still covered by the scheme, you must continue to monitor your emissions, and submit a verified report to your regulator before the end of March.
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