Integrated ETS Management


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  • © 2008 Cassini Consulting GmbH 01.10.09
  • © 2006 Cassini Consulting GmbH 01.10.09
  • © 2006 Cassini Consulting GmbH 01.10.09
  • © 2008 Cassini Consulting GmbH 01.10.09 © 2008 Cassini Consulting GmbH 01.10.09
  • © 2008 Cassini Consulting GmbH 01.10.09 © 2008 Cassini Consulting GmbH 01.10.09
  • © 2006 Cassini Consulting GmbH 01.10.09
  • © 2006 Cassini Consulting GmbH 01.10.09
  • Integrated ETS Management

    1. 1. Integrated ETS Management. Environment meets Business. Benjamin Walther Christian Lambertus T +49 (0) 170 354 365 8 T +49 (0) 176 830 233 87 mail mail visit visit
    2. 2. Management Summary Status & Overview: Most Airlines are not yet fully aware of the scale in which EU-ETS will influence their business decisions and their future plans. The challenge of EU-ETS is to develop strategies to close the gap between allocated allowances and the actual amount of certificates required at the end of each trading period. Your airline receives free allowances covering ~83% of its emissions. The remaining ~17% have to be acquired via diverse channels. This gap increases by x% as your airline intends to grow within the trading period. (See slide 5) Integrated ETS Management: The Integrated ETS Management concept enables airlines to determine the size of the gap and its development during the trading period with regard to growth. Elaboration of right measures and strategy to close the existing gap, enables airlines to manage their allowance stock efficiently. Thus providing a competitive advantage. Determination of optimal mix of acquisition channels for allowances to reduce costs to the utmost minimum. AviationExperts ETS-Services: AviationExperts combine proven aviation industry knowledge with EU-ETS framework competency. Due to our aviation expertise we are aware of the strong interdependencies of affected business processes which enables us to develop solutions that are feasible for airline operations and tailored to your needs. 2 01.10.2009 Integrated ETS Management
    3. 3. Agenda Status & Overview Integrated ETS Management Our Services 3 01.10.2009 Integrated ETS Management
    4. 4. The importance of an EU-ETS strategy is underestimated by numerous airlines. Facts Status of ETS Strategies Including EU-ETS into an airline’s strategic 100 decisions is essential for its future development and competitiveness. 75 85% Major airlines are developing global strategies including EU-ETS. 68% 50 Many Non-European airlines currently consider short-term milestones (i .e. Monitoring Concepts) and neglect the long-term 25 implications of EU-ETS. In the long-run, non-consideration of EU-ETS 0 will be a high risk for Non-European airlines. Major EU Airlines Mid-Sized EU Small-Sized EU Major Non-EU Mid-Sized Non- Small-Sized Non- Airlines Airlines Airlines EU Airlines EU Airlines Already developed Currently developing Not yet considered The integration of EU-ETS in an airline’s processes and strategy is the key to gain a competitive advantage in the future. 4 01.10.2009 Integrated ETS Management
    5. 5. The challenge of EU-ETS at a glance. Situation Composition of Allowance Stock The free allowances allocated for the second period Unknown Expansion Uncovered Gap 2013-2020 will be based on the operated flights of +X% Factor X 2010. The amount of free allowances will not change during Gap of uncovered the whole trading period from 2013-2020. 17% emissions in trading period Any expansion after allocation will reduce the portion of free allowances whereas the unknown expansion factor X increases. Free Allowances The arising gap can be closed by: Over the counter trading Free allowances Emission stock exchange 83% allocated by EU for Hedging of allowances reports of base year EU special pool for large expansion CDM/JI-projects Certificate auctions Penalties for uncovered emissions For the second trading period (2013 – 2020) every airline will receive free allowances for ~83% of their emissions in 2010. 5 01.10.2009 Integrated ETS Management
    6. 6. The portion of additionally required allowances will increase in line with your airline‘s expansions. Example Calculation Example Illustration Taking a mid-sized airline with 1.5 Mio. Tonnes 535.000 2 Million of emissions in 2010 and an annual growth of 350.000 2%. The quantity of additional required allowances will increase from 350.000 in 2013 to 535.000 in 2020. 1 Under consideration of the current price per allowance (~14 €) additional costs of 4.8 Mio. € in 2013 and 8.1 Mio. € in 2020 will arise. The complete trading period from 2013-2020 will cause costs of 50 Mio. €. 0 2013 2014 2015 2016 2017 2018 2019 2020 Free Additional The more ambitious your airline’s growth plans are, the more you should focus on the gap of allowances that you require to cover all emissions. 6 01.10.2009 Integrated ETS Management
    7. 7. Agenda Status & Overview Integrated ETS Management Our Services 7 01.10.2009 Integrated ETS Management
    8. 8. Your airline‘s business goals will be affected by four major components arising from ETS in the future. Additional Costs Additional Constraints Airlines will face additional Emission allowances as a costs due to required constraint will affect future allowances not covered by fleet & network planning. free allowances. Business Goals Additional Processes Additional Market Allowance trading will Designated ETS processes become an additional will be essential to cover competitive stage for the new requirements. airlines. 8 01.10.2009 Integrated ETS Management
    9. 9. An integrated ETS Management Concept enables you to maintain your heading in terms of business goals and strategy. 1 Allowance Optimization 2 Network / Fleet Planning Optimization of allowance management Consideration of ETS in mid-and long-term for complete emission coverage. network and fleet planning. Identification and management of CDM/JI Evaluation of future business models projects and activities. under the premise of ETS. Identification of opportunities from Determination and Integration of ETS swapping CER’s and ERU’s Integrated costs in network planning decisions. ETS Identification of the optimal Management Early integration of proper operational allowance trading mix. ETS processes. Consideration of non-aviation business Implementation of IT-Systems to support opportunities along with ETS. ETS processes. Development of an ETS organization Design trading processes and strategy.(in-house development vs. out-sourced service). 3 Trading Mechanism 4 Enterprise Integration 9 01.10.2009 Integrated ETS Management
    10. 10. 1 CDM / JI projects – A strong leverage to compensate for ETS costs. What is it about? Example Clean Development Mechanism (CDM) and • A mid-sized airline emits 1.5 Mio. tonnes of CO2 per year. Joint Implementation (JI) are mechanism for • The assigned free allowances in 2013 will cover ~83% of the ecologically neutral industrial growth in emissions. developing countries. • Without CDM/JI projects and a current price of ~14 € per Common examples are the installation of filter tonne of CO2, the airline faces additional costs of 3.5 Mio. €. systems in power plants or realization of wind (Scenario 1 ) energy projects. • By using CDM/JI projects the airline can reduce the costs for CDM and JI also represent an opportunity for additional allowances to 1 Mio. €. (Scenario 2 )*) airlines to gain additional emission allowances. Investing in existing projects or setting up own 17% 12% 5% projects will result in an ROI determined in 1 2 EUA’s. Although a cap of 12% of allowances generated 83% 83% from CDM/JI exists, the ROI in combination with the marketing leverage created should be considered. Free Allowances CDM/JI Projects Additional *Additional costs for CDM/JI projects are not considered. The above example only holds for CDM/JI projects with a investment of >2.Mio:€ and a return of the maximum of 12% of allowances. 10 01.10.2009 Integrated ETS Management
    11. 11. 1 CDM / JI projects are easy to realize and a complementary component for acquiring the necessary allowances. General Rating Invest in existing The United Nations provide a list of approved project CDM/JI projects currently open for investment. CDM/JI projects can be very useful for The administrative effort to invest in such gaining additional allowances. projects is comparatively low. Some projects require huge investments. Therefore, a detailed business case is essential for all planned CDM/JI projects. Moreover all CDM/JI projects should be Setup own project Beside investing in existing projects it is also aligned with an airlines’ strategy. possible to setup own projects. A mix of several small shares in various Compared with the higher administrative and projects can be used for CSR marketing financial effort an airline can achieve further in the desired region. benefits out of those projects (Corporate Social Responsibility). AviationExperts have the expertise to develop CDM/JI business cases determining the best-fit scenario with the optimal ROI in allowances and CSR for your airline. 11 01.10.2009 Integrated ETS Management
    12. 12. 2 Network planning decisions have to take ETS-costs into account. What is it about? Example Future Network Planning will be strongly influenced by EU-ETS, as it will increase costs • A flight from JFK to BOM with 300 passengers on board. per flight (see example). • Scenario 1 : 1-Stop flight via LHR Therefore it is essential to adjust your future • Scenario 2 : Non-stop flight to BOM network strategy with regard to ETS. Small capacity with high frequency results in higher emissions. Scenario 1 Scenario 2 Each route planning scenario has to consider JFK - LHR 126t CO2 JFK - BOM 316 CO2 ETS for business case modeling. The fleet management has to be reviewed LHR – BOM 165t CO2 according to possible changes to network strategy. Cost per t CO2 14 € Cost per t CO2 0€ Every new route increases the expansion factor ETS Costs 4.074 € ETS Costs 0€ regarding the coverage of emissions with free allowances. Airlines that are able to integrate ETS Management into Network Management will reduce costs arising from the increasing gap of allowances resulting from expansion. 12 01.10.2009 Integrated ETS Management
    13. 13. 3 Airlines will compete on an additional non-aviation market: Trading of allowances. Trading of additional allowances Trading of complete allowances Airlines have to participate in allowance trading in Airlines can participate in allowance trading with their order to buy additionally required allowances. complete allowances. One approach is to stockpile the amount of Airlines receive their free allowances one year in allowances by traditional buying of certificates. advance. The portion of free allowances will not be used to During the year airlines can either secure the generate additional certificates. allowances or start trading with them. Only buying additional allowances has low efforts By using the allocated free allowances for trading, concerning business processes, but bare the risk of airlines have a better leverage to acquire the amount high costs depending on the current bid price for of certificates necessary. allowances. X X Additional Additional Free Free Trading No Trading Trading No Trading 13 01.10.2009 Integrated ETS Management
    14. 14. 3 Airlines have to choose an adequate trading model today to benefit tomorrow. Trading Models Trading Methods Trading Partner Over the Counter Trading All trading activities are performed by a Direct trade of certificates partner (broker or bank). between companies. Stock Exchange Trading Pool Trade of certificates at the Composition of a trading pool together European Energy Exchange with other airlines or participants. (EEX) Own Trading Department Hedging Setup of an own trading department who is in charge for all trading activities. Trade of certificates and securing through futures. € 14 01.10.2009 Integrated ETS Management
    15. 15. 4 The integration of proper ETS processes will help to reduce the overall costs. What is it about? Areas of Enterprise Integration EU-ETS is more than the development of Monitoring Concept Organization IT and will have a significant impact on Designation of ETS responsible Integration of IT system all processes of an airline. persons as well as a ETS Task supporting you in all areas of To minimize the impact it is essential Force and an ETS hierarchy. ETS (i. e. Automated Reports). to integrate ETS-activities accurately into your existing business process environment. Therefore it is important to build up Processes People processes & organization to operate Setup and documentation of Training of staff to create ETS in the best possible way. proper ETS processes fitting into awareness of EU-ETS in your current operations. departments. An organization can effectively operate when all components are working along a common path towards a clear and shared goal. 15 01.10.2009 Integrated ETS Management
    16. 16. Path to realizing the Integrated ETS Management Concept. Setup Analysis Evaluation Implementation Management Identification of Analysis of Development of Selection of Continuous stakeholders and current strategy strategy scenarios strategy. monitoring and departments. with regard to: for acquiring Implementation of management of Setup of ETS 1. Future traffic lacking strategy into ETS strategy. project team. allowances. business Ongoing 2. Future network Commitment of Development and processes and adjustment of 3. Expansion plans. management. assessment of organization. strategy. Identification of business cases. Development of Definition of key interfaces project plan and Development of performance between current goals. risk strategies. indicators. processes and ETS. 16 01.10.2009 Emission Trading Scheme
    17. 17. Agenda Status & Overview Integrated ETS Management Our Services 17 01.10.2009 Integrated ETS Management
    18. 18. AviationExperts combine proven industry knowledge with the dedication for innovative solutions tailored for each client. Aviation Know-How Your Benefit Integration of ETS under the premise Operations Control, Network Management, Scheduling, Revenue Management, Capacity of operational feasibility. Control, Airline IT-landscape, Airline Business Immediate return on investment as Processes, Airport Operations. experts need no “acclimatization” to the industry. Awareness of interdependent processes within an airline ETS Know-How guarantees a sustainable result. Get access to industry best-practice Regulatory Framework, Compliance, Risk knowledge. Management, Trading, Monitoring, Verification, High product quality due to specific Reporting, IT-Support, CDM/JI Project training according to industry Assessment standards. 18 01.10.2009 Integrated ETS Management
    19. 19. AviationExperts – we are the specialists among consultancies. We integrate necessary ETS activities into your airline’s business process environment. We find ways to acquire the necessary certificates at lowest possible cost. We assist you in the further development of ETS processes to stay the leading edge and maintain a competitive advantage We develop your specific ETS strategy according to your needs and preferences. With AviationExperts as specialists for ETS integration your airline gains a competent partner with proven industry expertise to guarantee long-term success for your business. 19 01.10.2009 Integrated ETS Management
    20. 20. For further information please contact us. Your contacts: Christian Lambertus T +49 (0)176 830 233 87 Benjamin Walther T +49 (0)170 354 365 8 20 01.10.2009 Integrated ETS Management