Analyst Says Emissions Trading Program May Have Unintended Consequences

While perhaps environmentally well-intentioned, the European Union's Emissions Trading System (ETS) may have the unwanted consequence of adding yet another obstacle to business aviation's anemic recovery. That's the assessment from Aviation Analyst Brian Foley.

Worldwide business jet deliveries were already down by 40% in just two years. Now, in a continued slow aircraft sales environment, would-be buyers are being asked -- told, really -- to spend time sorting through all the implications of ETS compliance, thus delaying the sales process. 
ETS begins January 1, 2012 and will apply to most business jet flights to, from and within European airspace. Non-European operators are exempt if they are already part of an ETS program in their home country.

Yet even before ETS takes effect, its impact is already palpable -- and chilling. "Earlier this year we were forced to lower our 10-year forecast of business jet deliveries to Europe from 25% of worldwide production to just 20%", notes industry consultant Brian Foley. "There's an evident pattern of expanding taxes and regulations there, including ETS, that will limit that region's future growth potential. From proposals of a private airplane passenger "ticket tax" in the UK to user fees for European airspace, these costs and uncertainties can only act as a disincentive to own or purchase a business aircraft."

Brian Foley

Because of the way in which ETS is designed to limit greenhouse gas emissions, business jet operators must face significant new complexities and costs. For example, they must submit a plan, monitor and document their emissions, and purchase "credits" in the event they exceed allowed amounts. General aviation is actually a very minor contributor to Europe's carbon footprint (much smaller than airline and military aviation, oil- and coal-fired power generation, and cars and trucks). Even so, civil penalties will be imposed where operators fail to comply.

Some of the airlines and their associations have begun vehemently pushing back against ETS, arguing that it is unilateral and constitutes an illegal tax.  “With enough shared and coordinated concern, the business aviation community may find this an opportune time to weigh in a little louder.”

FMI: www.brifo.com