Panagiotis Karamanos & Michael O’Connor*Environmental Experts, in EU-India Collaboration

“Institutional Capacity Building for the Civil Aviation Sector in India,”

from Athens International Airport

June 24, 2011*This document represents the views of the above authors only

Climate Change and the European Union’s Emission Trading Scheme

The Challenge for Indian Airlines

1. European Union’s approach to climate change

2. Aviation and the Emission Trading Scheme

3. Responsibilities of Indian airlines

Discussion

European Union’s response

Ratification of Kyoto Protocol by all EU Member States in 2002

EU target: 8% reduction distributed amongst its Member States (e.g. Germany -21%, UK -12.5%, Greece +25%)

Generally aggressive position on climate change compared to other developed nations as shown by 2020 targets: Reduce GHG emissions by at least 20% vs. 1990

Increase share of renewable energy to 20%

Increase energy efficiency by 20%

Comprehensive policy and instruments to back up 2020 targets including the world’s largest Emission Trading Scheme (ETS) for GHGs

EU Emission Trading Scheme Established through Directive 2003/87/EC

Covers 10,000+ installations (>20MW) ~50% of EU’s CO2

Member States set National Emission Caps and allocate allowances for free and increasingly by auction

Participants exceeding their allowed emission quota may purchase allowances from other, cleaner participants, purchase approved emission reduction credits through Clean Development Mechanisms or Joint Implementation projects, or pay a fine

1st Trading Period: 2005-2007 completed

2nd Trading Period: 2008-2012 in progress

Annual monitoring, verification & reporting of emissions

CO2 Emissions by Sector

2%

2%

11%

15%

33%

24%

13%

Road Aviation Chemicals & CementLand Use Change & Forestry Light, Electricity, Heat Other Energy & IndustryOther Transportation

Multiple contributors & stakeholders Airport operators 5% of the 2% share (i.e. 0.1% of

the

emissions) is attributable to airports

Greater airport community (handling, cargo, retail, etc.)

Passengers (business, tourism)

International Civil Aviation Authority (ICAO) and local Civil Aviation Authorities

Airlines

Aircraft manufacturers

Engine manufacturers

What are airports doing about climate change?

Airport Carbon Accreditation ““ACI EUROPE and its ACI EUROPE and its

members commit to reduce members commit to reduce carbon emissions from carbon emissions from airport operations fully airport operations fully

within their own control with within their own control with the ultimate target to the ultimate target to

become carbon neutral.”become carbon neutral.”

Level 1: Mapping Ankara, Antalya, Bologna, Budapest, Chisinau, Cork, Dublin, Dubrovnik, Farnborough, Istanbul, Izmir, Portuguese Airports, Prague, Shannon, Toulouse-Blagnac Airport

Level 2: Reduction Athens International Airport, Brussels, Charles de Gaulle, Frankfurt, Hamburg, Kristiansand, Manchester, Orly

Level 3: Optimisation

Amsterdam, Heathrow, Gothenburg, Munich, Zurich

Level 3+: Neutrality

Göteborg Landvetter, Linate, Malpensa, Oslo, Stockholm, Trondheim, Umea

Levels of accreditation & participants

Athens International Airport

Accredited at Level 1 (Mapping) in 2009

Upgraded to Level 2 (Reduction) in 2010

Emission reduction target:

25% reduction in CO2 emissions (Scope 1 and 2)

by 2020 using 2005 as a baseline year

Climate Change Corporate Action Plan since 2008:

Conversion of vehicles to LPG / purchase of hybrid vehicles

Investment in energy-saving technology (hardware & software)

50% recycling rate target for 2012 / use of recycled materials

Vravrona wetlands protection programme

8MW photovoltaic park under construction

Multiple contributors & stakeholders Airport operators 5% of the 2% share (i.e. 0.1% of

the

emissions) is attributable to airports

Greater airport community (handling, cargo, retail, etc.)

Passengers (business, tourism)

International Civil Aviation Authority (ICAO) and local Civil Aviation Authorities

Airlines

Aircraft manufacturers

Engine manufacturers

What about aircraft emissions?

In 2009 the States belonging to the International Civil Aviation Organisation (ICAO) agreed to the following: a global goal of 2% annual improvement up to 2050

further explore more ambitious emission reductions including carbon-neutral growth

development of a global CO2 standard for aircraft

development of a framework for market-based measures, such as emissions trading, in international aviation

further financial and technical assistance to States

submission of States’ action plans which outline their policies and actions as well as annual reporting of aviation fuel consumption.

What about airlines?

IATA’s (International Air Transport Association) 4-pillar strategy calls for improvements in:

Technology (airframe design and materials, engine efficiency, alternative fuels, etc.)

Operational Efficiency (aircraft and ground operations)

Infrastructure (Air Traffic Management, airport capacity)

Economic Instruments (emissions trading, emissions charges)

Challenge: to be environmentally effective and economically feasible

Inclusion of aviation in EU ETS

EU is implementing the first ETS to address aviation

Aviation included in EU ETS through Directive 2008/101/EC

All (European and foreign carrier) flights landing at or taking off from airports in EU Member States

De minimis: airlines with less than 1 round-trip flight to / from the EU per day are exempt as well as some types of flights (training, military, research, etc.)

Inclusion starts in 2012 and continues through next period: 2013-2020

Inclusion of aviation in EU ETS Benchmark set at average of 2004-2006

emissions in order to account for considerable growth in aviation since 1990

Emissions cap: 97% of benchmark in 2012 decreasing to 95% in 2013

Allowances allocation (2012): 85% free/15% auctioned

Allocation is determined by an airlines’ share of tonne-kilometers 2 years earlier, e.g. 2010 share for 2012

Participants exceeding their allowed emission quota may: purchase allowances from other participants (airlines and thermal

installations)

purchase approved emission reduction credits

or pay a fine

Indian carriers & EU Administering Member State

UK

Air India, Jet Airways India

France

Go Airlines, Indigo, Jet Lite India Ltd

Cyprus

Kingfisher Airlines

Requirements for Indian airlines

For those Indian airlines flying into / out of European airports meeting the criteria for inclusion in the EU ETS must have already:

submitted an annual emissions and tonne-kilometer monitoring plan in August 2009 for approval by the relevant EU Member State

started monitoring emissions and tonne-kilometer data since January 2010

submitted externally verified emissions and tonne-kilometer data for 2010 by March 2011 (and every March thereafter)

receive free allowances based on benchmark calculation in February 2012

2012 and beyond

Source: VerifAvia

A simplified exampleof how the EU ETS works

How are 2012 allowances allocated?

Average 2004-2006 emissions: Average 2004-2006 emissions: 200,000 200,000 tonnestonnes

2012 Cap: 2012 Cap: 194.000194.000

Free allowances: Free allowances: 165.000165.000

Auctioned allowances: Auctioned allowances: 29.00029.000

How will the 165,000 free

allowances be allocated between

airlines?2010 Tonne-Kilometers = 2010 Tonne-Kilometers = Σ Σ (Payload x (Payload x

Distance)Distance)

Calculate Tonne-Kilometers of Air Greece: Calculate Tonne-Kilometers of Air Greece: 500,000 TK 500,000 TK ((50 50 %)%)

Calculate Tonne-Kilometers of CleanAir: Calculate Tonne-Kilometers of CleanAir: 300,000 300,000 TK TK ((30 %30 %))

Calculate Tonne-Kilometers of PropellAir: Calculate Tonne-Kilometers of PropellAir: 200,000 TK 200,000 TK ((20 20 %%))

TOTAL Tonne-Kilometers:TOTAL Tonne-Kilometers: 1,000,000 TK1,000,000 TK

2012 Free Allowances: 2012 Free Allowances: 165,000165,000

Air Greece:Air Greece: 82,50082,500

CleanAir:CleanAir: 49,50049,500

PropellAir: PropellAir: 33,00033,000

How much did my airline emit in

2012?

Airline Fuel Consumption(tonnes CO2)

Emissions

Air Greece 26,190 82,500

CleanAir 12,000 37,800

PropellAir 15,000 47,250

Emissions = Mass of Fuel Consumed

x 3.15 tonnes CO2 per tonne Fuel

Does my airline have enough allowances for

2012?

Airline Emissions Allowances Status

Air Greece 82,500 82,500 OK

CleanAir 37,800 49,500 Sell

PropellAir 47,250 33,000 Buy/Invest

Concluding Remarks

Inclusion of aviation in EU ETS is a reality

Rules are relatively clear

EU ETS is somewhat flexible

Several Indian airlines are required to participate

Actual impact to be evaluated in 2013 and beyond