Increase in permit availability sought for new entrants

A lack of committed set-aside of carbon permits for new entrants could make life difficult for new airline start-ups during the early years of aviation's admission to Europe's emissions trading regime.

Peter Liese, the German Member of the European Paliament appointed to steer the European Commission proposal through the legislature believes this should be a top priority.

"The EC has proposed that the level of auctioning will be set at the historic average of the existing trading scheme - around 3%. The EC has, however, not foreseen the need for easy access for new entrants which surely goes against the idea of competition and innovation."

"I would like to see an increase in the number of permits available for new entrants. If it is designed as the EC proposes then the auctioning will be the ETS average but I believe it should be at least a doubling of that."

The EC initially assessed three options for start-ups, all of which are currently available for new businesses or expansion initiatives under the existing scheme. They could either buy permits on the carbon market, access a set-aside of free permits earmarked for periodic auctioning or alternatively access a reserve through a member state's own allocation plan.

Difficulty in defining exactly what a new airline entrant constituted led the EC to recommend the purchasing of permits through auction or via the market from the 2011 launch date. "This is only a temporary measure - new entrants will be able to apply for an allocation of allowances as incumbents when allowances for the subsequent period are allocated," says the EC.

A new airline wanting to secure free carbon permits when the new scheme phase starts in 2013 would need therefore to produce reference benchmark data two years in advance, meaning operational data for 2010 would be mandatory.

Graham Stuart from London law firm Norton Rose cautions against measures that would lead to any oversupply of permits: "We really need to know how any increased amount would impact on the aviation industry's competitiveness. Too much supply and the price will inevitable drop."

Liese reports that he expects to finish drafting his report by early June and that the parliamentary environment committee is scheduled to vote in October before a plenary session vote is held the following month.

Source: Flight International