Corporate and commercial
aircraft face seizure if EC rules are breached.
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The extension of the EU Emissions Trading
Scheme (ETS) to the aviation sector has meant that, from now on,
lessors and financiers will need to be more careful in order to
ensure that aircraft operators comply with the new rules.
The penalties, indeed, could be as stringent
as confiscation and sale of the aircraft, with the new rules
applying across the board, from commercial aircraft to corporate
jets – despite business aviation accounting for only 2% of the
overall aircraft emissions.
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By GlobalDataAn EU directive extended the ETS scheme –
which requires large CO2 emitters to monitor their
emissions annually and surrender allowances to cover them – to the
aviation sector around two years ago.
The UK is transposing the EU directive into
law through two sets of regulations – with the 2010 regulations
still in the consultation phase.
Tim Baines, a climate change lawyer at Norton
Rose’s London offices, explained: “2012 is the first year in which
aircraft operators will be included in the ETS scheme.
“Aircraft operators will have the obligation
to surrender allowances in respect to their emissions, but since
this year they have to be monitoring their emissions and collecting
data to allow access to free allowances.”
Although the legislation targets ‘aircraft
operators’, there are consequences for the lessors, too.
According to Norton Rose senior associate Ben
Peacock: “Aircraft owners and lessors need to ensure that the
lessees – if they are the aircraft operators – are complying with
their EU ETS obligations.”
Peacock added: “The EU Directive, commission
decisions and guidance notes specify how the aircraft operator may
be determined.
“This is particularly important in the context
of wet leasing where, depending on individual circumstances, it may
be the lessee, rather than the lessor, which will be the aircraft
operator, even though the aircraft is being flown by the lessor on
behalf of the lessee.”
Penalties for non-compliance can range from
fines, to operator bans, and confiscation and sale of the aircraft,
in the case of persistent breaches.
Dealing with risks
To avoid this, lessors need to check that in
the lease contracts there are sufficient clauses ensuring that the
lessee complies with the obligations.
Peacock said: “Many long-term leases being
entered into today will be in effect in 2012 and accordingly,
should be dealing with EU ETS risks.
“Financiers therefore should ensure that their
leasing documentation which will come into effect in 2012 and
beyond sufficiently addresses the EU ETS obligations of the
aircraft operator.
“For example, there should be an obligation
upon the aircraft operator to comply with its EU ETS obligations
and, if necessary, provide the relevant parties with evidence of
such compliance.”
The key point for lessors, therefore, will be
how to mitigate their own risks.
Ensuring the documentation going forward (and
the current documentation, which needs to be amended) factually
addresses EU ETS risks will be a top priority for them.
