Aviation EU ETS: implementation, case study and way forward

Transcription

1 Aviation EU ETS: implementation, case study and way forward Julien Dufour, Founder & CEO, SustainAvia Gary Cleven, Worldwide Associate Consultant, SustainAvia Athar Hussain, Assistant Manager - Quality, Health, Safety & Environment, Pakistan International Airlines 2Degrees Webinar, 19 Janvier 2010

2 Summary Introduction (Julien) Overview of key implementation and IT issues (Gary) Case study: Pakistan International Airlines (Athar & Gary) Way forward (Julien) Optimization of free allowances Carbon trading strategy Verification Pricing & network strategy Timeline A few words about SustainAvia and Q&A 2

3 Part 1 Introduction - EU ETS start-up year: a fast-pace process 3

4 Transposition of EU ETS Directive underway but not for tomorrow! EU Directive 2008/101/EC Passed 19 Nov 2008 Published in OJEU: 13 Jan 2009 Came into force: 2 Feb 2009 Transposition of EU ETS Directive into national law Deadline for all Member States: 2 Feb 2010 Sweden: 1 Jun 2009 Spain: 30 Jun 2009 Germany: 22 Jul 2009 Ireland: 23 Jul 2009 Italy: 6 Aug 2009 UK: 17 Sep

5 Deadline for the submission of monitoring plans: a patchwork of extensions! MRG: Draft: Feb 2009 Final: 16 Apr 2009 List of operators: Draft: 11 Feb 2009 (2755 operators) Final: 5 Aug 2009 (3939 operators) Deadline for submission of monitoring plans: 31 Aug: most Member States 30 Sep: Greece, Italy Oct: Sweden, Germany 12 Nov: UK (AE) 31 Dec: UK (TK) Unspecified: Hungary, Slovenia 5

6 Monitoring plans are under review and CA have very different approaches! SustainAvia submitted plans for 24 airlines and aircraft operators: France: 5 by 31 Aug (all approved) Greece: 6 (no feedback) Sweden: 2 (all approved) Italy: 1 (approved) Spain: 1 (30 Sep) (approved) Germany: 2 (20 Oct) (no feedback) Ireland: 1 (31 Aug) (approved) UK: 6 (all approved) UK: by far the best organized and fastest CA Germany: by far the most complicated process and slowest CA 6

7 Part 2 Overview of key implementation and IT issues 7

8 Implementation issues Aircraft monitoring Generally not a problem Issues: Missing of short-term or ad-hoc wet-leased in aircraft Fuel and payload data required from lessor Our recommendations: Oral 8

9 Implementation issues Flights monitoring Issues: Identification of EU ETS covered flights Identification of exempted flights (e.g. Head of State) Our recommendations: Oral 9

10 Implementation issues Fuel uplift monitoring Two options: fuel supplier or on-board system Typical option: fuel supplier Issues: Actual density rarely written on fuel delivery note Actual density rarely recorded on flight log Our recommendations: Oral 10

11 Implementation issues Fuel in tanks monitoring On-board measurement system Method A or Method B: not an issue Issues: Maintenance activity: need to monitor fuel in tanks after (Method B) or before (Method A), rarely done ACARS-equipped aircraft: no fuel reading for maintenance activities Our recommendations: Oral 11

12 Implementation issues Pax monitoring Two options: tier 1 or tier 2 Objective: maximize reported pax weight Typical option: tier 1 Issues: Tier 1 or tier 2? Our recommendations: Oral 12

13 Implementation issues Mass of freight and mail monitoring Exclusion of tare weight or pallets and containers: Sometimes part of Dry Operating Weight Issues: Load sheet sometimes does not separate mass of freight and mass of check-in luggage Our recommendations: Oral 13

14 Implementation issues Fuel consumption monitoring Issues: Consumption of flight N requires data from flight N-1 (Method B) or flight N+1 (Method A) Our recommendations: Oral 14

15 Implementation issues Control activities Issues: Total burden! Our recommendations: Oral 15

16 Implementation issues Internal reviews of reported data Oral 16

17 Implementation issues Conflict between EU ETS and EU-OPS Fuel density EU-OPS: An operator must determine the mass of the fuel load by using the actual density or, if not known, the density calculated in accordance with a method specified in the Operations Manual. EU ETS: same but more precise (0.8) Operations Manual: alternative method can be different (0.79 or 0.81): amend Operations Manual Records and documentation: EU-OPS: 3 months for load sheet and journey log; 36 months for technical log EU ETS: 10 years Who can the most, can the least : amend Operations Manual to reflect EU ETS 17

18 IT or not IT? IT is the key! Most data elements are already recorded electronically and stored in a database Modify: adapt existing IT systems (34) Make: develop new in-house IT system (4) Buy: get off-the-shelf solution (13) We recommend: Use existing IT systems as much as possible but also use manual methods with paper copies as a backup and cross check 18

19 What is a good IT system? Automatic input of data, electronic data link: DCS messages at departure and arrival (LDM, MVT), EFB, electronic load sheet, ACARS, etc. Manual input of data is not preferred due to possibility of typing errors Electronic cross-check of flight data with Eurocontrol invoices (CRCO*DATALINK) Electronic cross-check fuel uplift data with invoices Electronic identification of data gaps Electronic plausibility checks : obviously wrong data, fuel consumption out of range, etc. Link with Fuel Management System 19

20 Common IT issues encountered Organizational issues - who Identification of key people for project team with business and IT knowledge Database issues - what Is the data in one master operations database, several separate databases or simply recorded on paper documents and manually entered in an Excel spreadsheet? 20

21 Organizational issues were the first problem Composition of business and IT team and identification of key personnel project spans many departments and functional areas within each department Few people in organization have total overview of all business processes, detailed knowledge of databases and exactly what each data element represents and where it originated (paper documents or automated systems) Uncertainty or diagreement among business staff and IT staff of what data elements represent Few people involved fully understood EU ETS rules 21

22 Database issues added to the confusion Is the data in one master operations database or several separate databases? Are all the data elements for a calculation available and in the same database? If the same data elements are in multiple databases, do they match? What exactly does each data element represent and does it conform to the EU ETS requirements? 22

23 Modify, Make or Buy IT Solution? Number of routes and operations to/from/within Europe determine amount of data to collect, check, process and if electronic databases and automation is required. Does the airline record information in an electronic database or record data on paper (and entered into Excel)? 23

24 Modify, Make or Buy IT Solution? Does the airline already have a fuel management system or other system that offers an off-theshelf EU ETS Module? Does the airline have an IT Department with experience developing IT solutions? Is enough time remaining until the deadline to start an IT project to develop, implement and test an IT solution? 24

25 Part 3 Case study Pakistan International Airlines 25

26 Project Team Team Green was established Fuel Control Division (acting as EU ETS Manager) Quality, Health, Safety & Environment Department Flight Operations Maintenance Marketing IT Initial planning sessions were held prior to kick-off of the EU ETS Project at PIA When: July-Sep, 2009 Where: PIA Head Office What: establishment of Roles and responsibilities for ETS project till its Completion 26

27 EU ETS in PIA Newsletter PIAs Quality, Health, Safety & Environment Department included information about EU ETS in it s Newsletter to inform the company of the significance and importance of the new European regulations The objective was to educate and increase awareness since EU ETS affects many departments 27

28 IT Solution PIA EU ETS Module PIA has an experienced IT Department and developed an initial prototype EU ETS Module as part of its Fuel Management System The PIA EU ETS Module calculates Payload for the TK Report and CO2 Emissions for the Aircraft Emissions Report 28

29 SustainAvia Role in IT PIA hired SustainAvia to develop and submit the TK and Aircraft Emissions Monitoring Plans (including IT Systems diagrams) SustainAvia also advised on the precise rules of the EU ETS regulations to ensure that PIA selected the correct data elements and developed the correct algorithms for the calculations PIA then checked its prototype EU ETS Module and made any necessary modifications and tests before releasing the final production version 29

30 Systems architecture, a non-technical view PIA used its existing IT systems and databases for the EU ETS The PIA EU ETS Module was programmed by the IT Department to provide a user friendly GUI (Graphical User Interface) for the Fuel Control Division (EU ETS Manager) The PIA EU ETS Module used data from the Fuel Management System database The Fuel Management System was already linked to other databases for access to the necessary information 30

31 Part 4 Way forward 31

32 Free allowances are allocated proportionally to an airline s share in the total reported payload in 2010 FREE_ALLOWANCESOperator X = TKOperator X * 85% * 97% * Baseline TKAll Operators With: - TKOperator X = [Payload (in tonnes) * (GCD+ 95km)] - TKAll Operators = [TKOperator X] - Baseline (tco2) is being estimated by the EC and Eurocontrol 32

33 It is possible to estimate how many additional free allowances each additional TK will generate in 2010 Assumptions: -Baseline CO2 estimates = contact us -TKAll Operators estimates = contact us FREE_ALLOWANCESOperator X = TKOperator X * K 33

34 It is also possible to estimate the NPV of one TK over the period Assumptions: - Cost of allowance: 30 - Cost of money: 5% Each additional TK generated in 2010 will bring X cent per year between 2012 and 2020 NPV of one TK = X cents NPV of 1 pax over 1000 km (100 TK) = Y 34

35 Adapt your pricing and network strategy in 2010 to optimize TK The longer distances the better: Shortcut unnecessary stops outside of EU The more payload the better: Tier 1 vs. Tier 2: analyse carefully Think about price elasticity and NPV of TK Make sure to include infants and non-active crew In freighter aircraft, adapt definition of non-active crew (load master, technician, accompanying persons, etc.) In special flights, adapt definition of non-active crew The more flights the better: Remember TK on wet-lease flights are reported by the ICAO call sign Remember TK on code-share flights are reported by the ICAO call sign 35

36 Carbon trading It is the stock market! Options: Buy EUA futures now to benefit from low prices Wait and buy EUA spots Combine fuel and carbon hedging CER/ERU from CDM/JI projects: Only 1.5% of total requirements max Price is significantly below EUA We thought no airline would use them however, 4 operators said they would use them 36

37 Carbon trading The EUA cost has varied between around 8 and nearly 40 since

38 Carbon trading On 18 January, the EUA spot price and the future cost 13.1 Futures traded on ECX Spots traded on BlueNext 38

39 Carbon leakage - At least four possible cases of potential market distortion Case 1 - Bypassing the EU on international long-haul flights between two non-eu cities Case 2 - Direct vs. indirect routes on international long-haul flights between EU and non-eu cities JFK CDG CDG PEK DXB BOM DXB Case 3 - Intercontinental flights between EU and non-eu airports where no direct flight is available Case 4 Operator below the deminimis rule competing against operator included in ETS on EU routes FRA FRA WDH GVA TYO IST Winning routes thanks to ETS Loosing routes due to ETS

40 Carbon leakage - Is there any risk of carbon leakage? In theory there should be carbon leakage Impact will depend of price of carbon credit and competitive environment Case 2 not so much, mainly cases 1, 3 and especially 4 40

41 Way forward - Set up the right Pricing & Network Strategy Optimize TK in 2010: Maximize distances of EU flights Minimize Emissions in 2012 Minimize distances of EU flights Cost pass-through rate: Will depend on route and competitive environment Ideally 100% but beware of price elasticity of demand EU ETS Survey: anything between 0 and 100% Will be like fuel surcharge Think about risks of carbon leakage 41

42 Way forward - Think about verification Reports must be verified by an accredited verifier UK: UKAS, process to start in May 2010 France: COFRAC, process to start in April 2010 EA-6/03, ISO 14065, BS EN Revision of EA-6/03 underway to include aviation activities List of accredited verifiers not before mid-2010 Verifier to: Ensure procedures consistent with approved plans Ensure correctness of reported data 42

43 Way forward Timeline First monitoring year: 2010 Other monitoring years: 20XX Verification of annual reports: 20XX data in early 20XX+1 (Jan-Mar) Submission of the report to the CA: Deadline 31 March 20XX+1 43

44 EU ETS opinion Our opinion Priorities have changed EU ETS not designed to please airlines but to fight global warming! Even if aviation cannot reduce emissions, it will participate in the effort by subsidizing emissions reduction efforts of other sectors The EC paved the way and now up to ICAO and the world community to design a global scheme The EU ETS is not that big a deal but Biggest shame: EU ETS to generate 1 billion / year for MS with no obligation no reinvest the money! 44

45 What s next? US cap-and-trade taxing fuel suppliers? Norway joins ETS in 2010 Australia, Japan, New Zealand ETS already in place Norway, Iceland and Liechtenstein already joined EU ETS Is Switzerland next? Integration of EU ETS into other schemes A Global Deal? Copenhagen summit If a third country adopts measures, which have an environmental effect at least equivalent to that of this Directive, to reduce the climate impact of flights to the Community, the EU ETS Directive contains a provision to provide for optimal interaction between the Community scheme and that country s measures. 45

46 Part 5 - A few words about SustainAvia 46

47 SustainAvia is an international aviation consultancy dedicated to the EU ETS Preparation of EU ETS monitoring plans Implementation advice including IT system changes Preparation of EU ETS Manual (Training and Implementation Guide) Control activities Preparation of annual reports 47

48 We help you all along the way towards a successful implementation of EU ETS 48

49 Optimize free allowances Optimize your network in 2010 to maximize your free allowances Apply for free allowances Submit a Tonne-Kilometer Monitoring Plan Trade carbon Engage into carbon trading and hedging to cover your risks Get the right IT Select the MRV IT System that s adapted to your airline s needs Comply Submit your Emissions Monitoring Plan on time to avoid sanctions With efficient planning and the right strategies, you can reduce your carbon bill Reduce emissions Adopt abatement strategies to reduce your emissions Plan the network Adopt the right network strategy to benefit from market distortion and gain competitive advantage Plan ahead Perform financial impact assessment and long-term carbon planning Price effectively Adopt the right pricing strategy depending on the competitive environment 49

50 Coming next Establishment of Verification company as separate legal entity (EA-6/03) COFRAC accreditation (ISO 14065) UKAS accreditation (BS EN 45011) Participation in CleanSky project: Project CARE (Contribution of Airlines for the Reduction of Industry Nuisances and Gases) Together with TUI, Airlinair, Transavia, OpenAirlines, ENAC, ENVISA 50

51 We have worked for many small or mediumsized airlines and aircraft operators 51

52 as well as large airlines 52

53 but also several US Part 91 operators! CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL 53

54 Part 6 Q&A 54

55 Merci! 55