SUMMER 2011 | AIRCRAFT IT OPERATIONS | WHITE PAPER: ETS | 33
ETS Financial Requirements
Data input
The first trading period commences from 1st January 2012. The impact of this will be that, each year, starting from 30th April 2013, aircraft operators will be obliged to submit their annual emission allowances to be set against their verified reported annual emissions for the previous year. From 2012 until 2020, by no later than 28th February each year, the Competent Authority will issue and transfer the number of free emission allowances allocated to each individual aircraft operator. Starting from 2013, after aircraft operators have submitted their verified annual emissions data, at latest by 31st March each year, and the Competent Authority has checked it, those aircraft operators will have to surrender, by 30th April each year, their free allowances for the previous year.
First of all a software solution needs to have flexible channels for data input. The source data for ETS is created in the aircraft cockpit and in the aircraft operator’s operations systems. Sometimes data is available on paper (like fuel slips) in other cases data is available electronically, like fuel suppliers’ invoices. A further key data source is the Eurocontrol support facility. Here the operator can download all the invoices for his call sign and use that data for the annual emissions report. Data Input channels: • OPS-System interface; • DCS messages for departure and arrival information from the airport; • EFB, e-Load Sheet; • ACARS messages; • Eurocontrol support tool (CRCO Datalink); • Manual Data Input. • Legal requirements and archiving The mandatory requirement for any ETS software application is that it fulfills all the legal requirements of the directives. This may sound as if it would not be worth mentioning but the ETS directives impose several unprecedented legal requirements on operators. For instance operators are required to store the source evidence for the emissions data (fuel slips, flight logs, rtc.) for 10 years. Legal requirements and archiving requirements: • Provides regulatory required ETS reporting formats; • Flexible reports and queries; • Stores documents and data for 10 years; • Provides an audit trail.
Aviation ETS Timeline
Under EU ETS, aircraft operators who emit more than the emission allowances they have received for free will be obliged to buy allowances from other participating aircraft operators or from operators of fixed installations, which are also covered under the EU ETS. Aircraft operators can fulfill their obligations to surrender certificates by buying carbon credits or allowances. There are a variety of allowance certificate types and a variety of procurement channels, such as EUA’s (EU allowances), EUAA (EU Aviation Allowances) and allowances generated by CDM (Clean Development Mechanism) and JI (Joint Implementation) projects – Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs). If, before 30th April of each year starting from 2013, aircraft operators cannot manage to submit sufficient emission allowances, i.e. they fail to submit emission allowances equivalent to their annual verified emissions for the previous year, they will have to pay a fine of €100 per tonne of CO2 emission and they will have to pay the full current market price for purchasing any remaining allowances that they have to surrender. Moreover, if an aircraft operator cannot manage to pay its fine or surrender sufficient allowances, it may lose its license and that may, in turn, lead to confiscation and sale of its aircraft. The key issues for the operator in the quest to minimize the financial impact of the scheme are therefore to know their individual exposure as a result of verified emissions and to know what and how to buy any emission allowances they might need. Carbon certificate prices have been volatile in the recent years, trading, at different times, from close to zero to above €30 per tonne. Defining the required amount of emission certificates plus buying at the best possible price is obviously a key matter for budgeting and financial planning in every airline. So a tool is needed that supports operators in the carbon purchasing process, in the investment decisions that have to be made and in a calculation of that process’s impact on operating the business. The financial requirements of EU ETS, even though they might not appear on everyone’s radar today are every bit as important as the annual reporting requirements. Operators will want to turn to IT tools to optimize the utilization of their free emission certificates. At the same time they’ll require intelligent forecasts and advice on when and what to buy. Both ETS requirements (reporting and financial) will have to be dealt with when selecting an ETS software package. Appropriate ETS solutions need to fulfill a number of criteria to handle the above mentioned requirements. Below are some of the more important criteria that any ETS software package will need to meet.
ETS Solution eMission providing the EU annual emissions report layout
Cross checking and validation The next set of requirements will be useful during the creation of the annual emissions report and its respective verification process. Intelligent software should perform automatic validations and flag missing data entries as well as obviously wrong values, so that the audit will be less problematic. Requirements for cross checking and validation: • Automatic cross check of flight data (actual against flight plan against Eurocontrol); • Validation of fuel uplift with fuel invoice and, for instance, a review of historic fuel consumption; • Flagging of obviously wrong data (e.g. boarded numbers greater than seat capacity or fuel uplift greater than tank capacity); • Drill down functionality.
The financial requirements of EU ETS, even though they might not appear on everyone’s radar today are every bit as important as the annual reporting requirements. Operators will want to turn to IT tools to optimize the utilization of their free emission certificates.