European Union Emissions Trading Scheme (ETS)

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EU ‘Stops the Clock’ on ETS and President Signs EU-ETS Prohibition Act

December 3, 2012

President Obama Signs EU-ETS Prohibition Act of 2011

The final passage of Senate bill 1956, sets into motion a process whereby the Secretary of Transportation is able to prohibit operators of U.S. civil aircraft from participating in European Union Emissions Trading Scheme (EU ETS). The law also contains a mandate that government authorities take actions necessary to hold U.S. operators harmless from the imposition of the unilaterally imposed environmental tax. Before taking any action, the Secretary is required to hold a public hearing at least 30 days prior to implementation of the prohibition.

While the passage of S. 1956 is a welcome development, it does not change the current situation for U.S. aircraft operators. NBAA is currently working with the Department of Transportation to determine their timeline for implementing provisions contained in the legislation.

European Commission Proposal to "Stop the Clock" on ETS

The European Commission in Brussels announced that it will temporarily suspend ETS requirements for flights operating to and from non-EU airports for a period of one year – until the November 2013 ICAO Assembly – to allow space for positive negotiations and international action on an alternative scheme. The formal derogation (temporary policy change) to Directive 2003/87/EC has been officially submitted.

Flights from EEA States (The European Economic Area (EEA) comprises the countries of the European Union (EU), plus Iceland, Liechtenstein and Norway), Switzerland, Croatia, and the territories and dependencies of Member States to 3rd countries as well as flights from 3rd countries into EEA States, Switzerland, Croatia, and the territories and dependencies of Member States (referred to as "extra-European flights") are covered by the stop the clock announcement.

In summary, the stop the clock proposal covers flights between EEA (including overseas territories) and third countries except Switzerland and Croatia.

The formal proposal, which should be agreed by early 2013, will be submitted to the European Parliament and the Council and is subject to the ordinary legislative procedure. In the event that the legislative process takes longer, operators which have either not received free allowances, or have returned free allowances received in 2012 for cancellation, should not expect enforcement activities to be taken against them by Member States in respect of reporting or surrendering emissions for flights to or from third countries and airports in the EU and closely connected areas.

Recognizing significant progress at last week’s ICAO Council, the EU Commission applauded strong political efforts made by ICAO and international stakeholders for continued development of a global Market Based Mechanism. European Commissioner for Climate Action Connie Hedegaard in a recent press conference acknowledged, “Finally, we have a chance to get an international regulation on emissions for aviation. This is indeed progress.”

The Commissioner made a recommendation to ‘stop the clock’ and defer all monitoring and reporting obligations as well as the surrendering of emissions allowances for operations to and from the EU on the strict condition that the ICAO Assembly produce a viable global plan following the upcoming Assembly. The Commission was very clear that in the absence of any real action from ICAO within the next year, the ETS law will be automatically reinstated.

It is important to note that flights operating within and between EU countries, regardless of where the aircraft is based, registered, or where the initial leg begins or final leg terminates, are not covered by this announcement. Those intra-EU operations are still obligated to comply with the current ETS law including all monitoring, reporting and verification activities as well as the surrendering of carbon allowances in April 2013.