On Final: The cost of emissions trading
The European Union Emissions Trading Scheme (EU ETS) is becoming the biggest tax grab in the history of aviation.
July 14, 2010 By Bob Shuter
The European Union Emissions Trading Scheme (EU ETS) is becoming the biggest tax grab in the history of aviation. The business aviation community is fully committed to meeting its environmental responsibilities and is prepared to work with EU authorities to implement procedures that are fair, transparent and cost –effective, and minimize the administration for all concerned. Business aviation has established an excellent environmental record of constantly improving fuel efficiency, delivering 40 per cent improvement over the past 40 years. Business aviation’s global CO2 emissions are very small, constituting approximately two per cent of all aviation CO2 emissions and 0.04 per cent of global man-made carbon emissions. Business aircraft are operated for specific missions and they fly efficient, direct routes between airports. Modern navigation equipment, combined with the latest technologies in aircraft and engine design and operational best practices provide for constantly improving fuel efficiency and reduced GHG emissions.
Unfortunately, the EU ETS is not a cost-effective method of addressing environmental concerns. The cost of the emissions trading will be a burden for all operators but it is one they can accept. However, the administrative costs will be completely unacceptable for all operators, but particularly for operators who have only one or two aircraft. This includes most business aircraft owners.
Some states are eagerly drafting regulations to allow themselves to charge aircraft operators outrageous administrative fees. This is in addition to the 15 per cent of carbon allowances that will be auctioned to allow member states a means of funding the ETS. For small operators, the administrative fees of the scheme will be too expensive to be considered a cost-effective environmental initiative. Take for example, a typical non-EU-based small operator making two trips into the U.K. per year; the charges to administer the UK ETS program are six times higher than the allowances that provide for environmental benefit under the EU ETS.
Here are some of the fees: The fee to apply for an emissions plan is $1,150. There is a fee of $660 to vary an emissions plan. If required, the aviation authority will charge $175/hour to calculate emissions on behalf of an operator. The annual administrative fee for a small emitter is $3,925 per year. For large operators, the fee is $6,275 per year. These fees far exceed the amount that a regulating authority should charge operators for simple transactions such as these. A senior U.K. official was questioned about the high administrative cost of the EU ETS and was not the least bit concerned. He replied that anyone who can afford a million-dollar aircraft can afford the fees. When questioned about a very possible consequence that operators may choose to avoid the EU, he replied that that was one of the goals of the scheme; to reduce the number of aircraft movements. There is a lot of irony here. EU transportation officials recently negotiated open skies agreements with Canada and the U.S., claiming the new agreements will give travellers more choices, up to an 18 per cent increase in traffic and lower prices. Meanwhile their environmental officials are trying to put the brakes on aviation. These EU environmental officials are overlooking the economic impact of aviation. Aviation worldwide accounts for eight per cent of GDP and only two per cent of emissions. Aircraft are used by businesses and are increasingly recognized as a productivity tool with benefits to nations, communities and industries. Discriminating against aviation may not be a wise economic move, particularly for states where tourism is a major contributor to their economies. Imposing economic penalties on aviation in the name of environmental progress may prove to be a poor decision.
Bob Shuter is the environmental affairs representative for the International Business Aviation Council (IBAC).
IBAC is a council of business aviation associations from around the world. It is an International Non-Governmental Organization (INGO) with permanent observer status with ICAO. IBAC’s Secretariat is based in the ICAO headquarters building in Montreal.