Emission Trading Scheme (ETS) Customer Presentation October 2009 Rev. 5
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 2
ETS History On October 25, 2003 the European Union Council adopted Directive 2003/87/EC the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS) Covers 10,000 energy and industrial installations, accounting for 40% of total EU greenhouse gas emissions and half of all CO 2 emissions By contrast, aviation accounts for roughly 3% of all CO 2 emissions, and general aviation only 2% of that, according to UN IPCC estimates EU ETS is composed of a variety of Directives aimed at various sectors of industry and is the pillar of the EU climate policy to meet its Kyoto objectives On October 24, 2008 the Council adopted Directive 2008/101/EC move incorporates aviation into EU ETS framework Directive 2008/101/EC is set to become law on January 1 st 2012 3
What is ETS? The EU ETS is a Cap and Trade scheme -- the largest in the world -- whereby CO 2 emissions are capped at specific levels: CO 2 emissions for aviation are being capped at 2004 2006 levels Operators will be required to account for their emissions via carbon credits either freely allocated or purchased via auction or on the carbon exchange EU ETS is mandatory and civil penalties can be imposed on those who fail to comply Revenue generated from auctions of carbon credits should go towards environmental projects, but is up to discretion of Member State 4
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 5
ETS: How Does It Work? The European Commission will establish levels of permitted emissions for each member state in order to achieve desired reduction objectives Each operator will be assigned a regulating Member State: Where valid operating license is granted, or Where greatest estimated attributed aviation emissions if no EU license Regulating Member State will be designated yearly Each Member State will be responsible to distribute its emission rights called EU Emission Allowances (EUA) (1) to operators 85% to be allocated free, 15% to be auctioned Operators that emit more than their number of banked EUAs will have to purchase more on the open market (trading) EU ETS also accepts Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs) (2) as equivalents to EUAs (1) 1 EUA = 1 Tonne CO2 (2) CERs and ERUs are emission reductions that comply with the Kyoto protocol. Also equal to 1 Tonne CO2 each. 6
ETS in Pictures How Will It Work? 100% 97% Inventoried Level Capped Level Shortfall To be kept aside for new entrants 85% 50% Allowable Pollution 25% Free Allowances 0% Year 1 scenario 2012 7
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 8
Who is affected by the ETS? All commercial and private jet operators flying into European aerospace excluding: Aircraft below 12,500 lbs (5,700 kg) MTOW Official (Government/Military) flights from non-eu Member States Search and rescue flights, scientific research flights, firefighting flights, ferry flights, training flights, etc. Commercial Air Transport Operator operating either: Fewer than 234 flights per 4-month period for 3 consecutive periods Flights with total annual emissions lower than 10,000 tonnes/year Operators that fly to/from/within Europe need to ensure they are captured by a member state (Click here for Operator List) Operators have already begun being contacted by their administering Member State Those that are not must contact their specific Member State s responsible agency (Click here for EU Member State Contact List) 9
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 10
What Does This Mean For Operators? There are deadlines to meet for the submission of MRV* plans: United Kingdom: 12 November 2009 Germany: 20 October 2009 Italy: 30 September 2009 Sweden: 15 October 2009 Bulgaria: 13 October 2009 Greece: 30 September 2009 Slovenia: December 2009 Hungary: Deadline TBD January 2010: 2-year pre-compliance period begins - reporting required January 2012: ETS becomes operational for aviation Operators who can prove they emit less than 10,000 tons of CO 2 per year can qualify for a simplified procedure (annual emissions only) 30 th April of each year, aircraft operators required to surrender emission allowances equivalent to CO 2 emitted (and reported to the competent authority) during the previous calendar year. Operators that do not surrender sufficient allowances 4 months after the end of the year will pay a penalty of 100 Euros per tonne The European Commission can elect to impose an operating ban on delinquent operators * Operators opting for the simplified procedure need only provide annual emissions plan 11
Monitoring and Reporting Timeline 12
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 13
Helpful Information Updated Regularly 14
ETS Section on CIC website 15
Fuel Burn Information 16
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 17
What is Carbon Offsetting? Carbon offsetting is a way to let you take responsibility for the carbon emissions your activities create by contributing to projects or initiatives that reduce CO 2 in the atmosphere. 18
The Bombardier Carbon Offset Program: A Simple Solution Offsetting Emissions Reduce emissions Produce oxygen Fly Your Aircraft $/hr Projects around the world that otherwise would not have happened $/project $/tonne Administer Consolidate Validate provider and results 3 rd -party validation 9 countries Project initiative and management 19
Overview: Bombardier s Carbon Offset Program Available to customers since February 1, 2008 Allows customers and operators to offset the emissions of their aircraft efficiently, effectively and easily Offered to customers through partnership with ClimateCare Recognized leader in carbon offsetting Funds multiple projects around the world to reduce greenhouse gases Focus on: Renewable Energy, Energy Efficiency and Methane Capture Chosen after rigorous selection process Operations validated by third-party environmental standards Founded in 1997, acquired by JP Morgan Bank in 2008 Open to all business aircraft customers All Bombardier models Non-Bombardier a/c in mixed fleet may also be accommodated 20
Bombardier Carbon Offset Program at a Glance Predictable Customers pay a fixed hourly rate depending on the aircraft they operate Customers are charged only the number of hours they wish to offset Painless Bombardier administers the program and handles all the paperwork Customers pay a monthly fee based on reported flight hours via the Bombardier Smart Services platform Proven Smart Services has more than 20 years of experience in administrating cost-per-flight-hour programs ClimateCare s projects are held to rigorous standards that are making a difference around the world 21
How to Register Interested customers can contact the Smart Services team: +1-514-855-7766 Customers who sign on to the Carbon Offset Program will receive a decal for each aircraft they are offsetting 22
Overview What is ETS? How does ETS work? Who is affected by ETS? What does this mean for Operators? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 23
Carbon Offset Program & the ETS Key Distinctions Bombardier Carbon Offset Program Based on VER offset credits, verifiable, 1 VER = 1 Tonne CO2 equivalent not tradable Bombardier Carbon Offset Program aimed at offsetting the emissions of our aircraft Funds invested in portfolio of projects to reduce greenhouse gasses Bombardier Carbon Offset Program voluntary and customers can offset aircraft emissions today EU ETS Incorporates EUA, ERU and CER credits, verifiable = 1 Tonne CO2 equivalent all tradable ETS does NOT offset emissions, it is a cap and trade system only Funds received from auctions to be used at the discretion of the respective EU country ETS is mandatory penalties and fines can be levied on those who do not comply -- ETS mandatory in 2012 Bombardier is working with ClimateCare to develop an ETS compliance program that addresses operator s obligations 24
Overview What is ETS? How does ETS work? What does this mean for Operators? Who is affected by ETS? What tools are available to Operators? What is Bombardier s Carbon Offset Program? How does ETS affect Bombardier s Carbon Offset Program? What are the next steps? 25
What Are The Next Steps Provide update to operators regarding on-board fuel measurement system accuracy Update information on CIC website for operators with obligations under the ETS Continue to support industry associations and government representatives in voicing operator concerns Work towards an ETS compliance solution for operators administered by Bombardier through Smart Services 26