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UK airlines start to receive their free EUAs

01 Mar 2012 18:07:13 | edcm

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Three UK airlines have been issued their free emission allowances for 2012, the country's Department of Energy and Climate (DECC) said on Thursday, making the UK the first European state to have issued them.

Just under 5m allowances were allocated to the airlines on Tuesday.

The three airlines were able to receive their EUA allocations as they have live registry accounts while the remaining airlines are still in the process of opening accounts. DECC did not disclose which airlines received their allowances, but 56.7m allowances are set to be issued for free this year (see EDCM October 2011). The UK environment ministry recently estimated that UK-based airlines would receive free emissions allowances this year that amount to 20% less than their reported emissions in 2010 (see EDCM 19 January 2012). Under the rules of the EU Emissions Trading System (ETS), airlines are supposed to receive free allowances for 2012 that amount to 15% less than their baseline emissions.

According to DECC calculations, British Airways will receive the most free allowances this year: 10.3m. Emirates Airlines and easyJet will be issued the next biggest allocations, receiving 4.3m and 3.7m respectively in 2012.

British Airways was unable to confirm when it would receive its allowances citing market confidentiality. An easyJet spokeswoman said that the airline had not received their allowances yet, while Emirates Airlines was unavailable for comment.

Green X

The GreenX exchange plans to launch emissions allowance products for the aviation industry from 2 April, the bourse said on Thursday.

GreenX will offer European Aviation Allowances (EUAA) futures next month, following in the footsteps of German Energy Exchange EEX (European Energy Exchange), which last month announced it was launching similar products (see EDCM 7 February 2012).

GreenX's future contracts will consist of 1,000 EUAAs and will be offered as quarterly and annual contracts. The bourse is currently waiting for regulatory approval from the Commodity Futures Trading Commissions before launch the products.

GreenX was unable to confirm whether it has any airlines on its books yet as trading members. But a spokesman said the EUAA contract had been launched in response to "direct demand" from its clearing members and from its trading members. GreenX's 16 clearing members are banks and brokers, while its trading members are clients both of the clearing members and of the exchange itself.

The spokesman was unable to comment on whether the exchange expects EUAAs to trade at a premium or a discount to EUAs as the market develops. GreenX's EUAA/EUA spread contract has been launched in response to demand from members, he said.

Liquidity on EUAAs is likely to pick up over the course of this year and would be boosted if the remaining political uncertainties in relation to airlines' involvement in the ETS were ironed out, the spokesman said.

A coalition of non-EU countries are opposing the inclusion of their airlines in the EU ETS (see EDCM 22 February 2012). CR/VF

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