Operation of the scheme for emissions trading in the aviation industry has started. With effect since 1 January 2012, all aircraft operators are now required to identify the volume of CO2 emissions for flights taking off or landing within the European Union, including Norway and Iceland, and surrender emission allowances to cover it.

The scheme also applies to aircraft operators having their principal place of business outside the European Union. This is the result of a decision of the European Court of Justice of 21 December 2011, which ruled that inclusion of such operators in the emissions trading process is legal. Nor are there any indications at the present time that this situation is likely to change for non-European operators as a result of political intervention. Despite massive protests, in particular from China and the USA, the EU Commission currently appears determined to ensure compliance with the emissions trading obligations also by non-European operators.

Operative implementation of emissions trading has started

While the aircraft operators had already been engaged in preparations for emissions trading since 2009, the actual operating phase finally began on 1 January 2012. On 31 December 2011, the aircraft operators concerned were allocated emission allowances free of charge. With effect as of 30 April of each year, starting from the year 2013, the airlines are required to surrender allowances for the CO2 emissions caused by their flights which started or landed in the EU in the previous year. If the allowances allocated free of charge to an operator prove insufficient for this purpose, the operator concerned must acquire additional allowances by purchasing them either at auction or on the open market. If allowances are not surrendered punctually or in the required amount, penalty payments will be levied in an amount of €100.00 per tonne of CO2 for which no allowance has been surrendered.

Special challenges for non-European operators

For non-European aircraft operators, participation in the emissions trading scheme presents particular challenges. They have to come to terms with the sometimes unaccustomed procedural rules of the EU member state that has been assigned to them as their administering member state. Apart from German companies, Germany for instance also acts as the administering member states for operators from countries that include the USA, Russia, Mexico and China, among others. Legal pitfalls can arise in connection with both the allocation and reporting procedures and the surrender of allowances, and sometimes also the sanction procedures. Attention must also be paid to the legal process regulations if an operator wishes to challenge a decision of the administrative authority.

Recommendation: Be prepared

In light of these facts, it is vital, especially for non-European operators, to have a clear overview of the procedural law of the administering member state. When do application periods expire? What rights to be heard exist for undertakings under the administration procedure? What time limits for lodging appeals must be observed? What are the consequences for non-compliance? Only if the answers to these and other similar questions are known can unpleasant surprises be avoided.