ETS SUPPORT FACILITY COSTS BREAKDOWN

ETS SUPPORT FACILITY COSTS BREAKDOWN 1. INTRODUCTION 1.1. The EUROCONTROL Agency has recently submitted information papers to EUROCONTROL s Air Navigation Services Board and to the European Commission s Climate Change Committee Working Group 3 (Emissions trading) on an ETS Support Facility that would be established to support States Competent Authorities to meet their regulatory obligations under the relevant European legislation. Both groups have requested that the EUROCONTROL Agency provide further details about how it has arrived at its cost estimate of EUR 2.12 million to deploy, operate and manage the facility over a period of three years. 1.2. In the light of these comments, and in order to ensure transparency towards stakeholders, the Director General has agreed that this briefing note should be prepared to explain in more detail the basis for the cost estimation. Furthermore, given the fact that emissions trading for the aviation sector is an issue that straddles both environment and transport policy, and which therefore requires close co-ordination within States, this note is being distributed in parallel to two separate meetings that take place on Wednesday 17 th February 2010 at which the proposed ETS Support Facility will be discussed. These are the EUROCONTROL Provisional Council Coordinating Committee and the next session of the European Commission s Climate Change Committee Working Group 3 (Emissions Trading). These meetings are attended by State representatives dealing with transport and environment issues respectively. 2. RESOURCE ESTIMATES 2.1. The Agency has performed an estimation of the total cost to implement and operate the facility for the initial pilot phase (from end of the prototyping phase in 2010 up to 30 th June 2013) to support ETS Competent Authorities only. This cost estimation is based on the current EUROCONTROL charging policy principles with regards to support provided to States. According to those principles, the estimated cost is in the order of EUR 2.12M. 2.2. The functions, related resources (expressed in terms of Full Time Equivalents FTEs) and charging principles to perform this estimate are summarised in 2.3. Table 1 and explained in the following paragraphs. In this estimation, activity is evaluated fully in terms of EUROCONTROL staff effort and not considering at that stage outsourcing. Mission expenses have not been considered as it is envisaged that meetings with users, whether on techical/operational or policy matters, would take place in Brussels. Would a State request a dedicated support that would require travel to its location, it would then have to be considered as an additional specific cost to this State. EUROCONTROL working paper prepared at the request of DG 15 February 2010 1

2.4. Implementation Phase 2.4.1. The implementation of the facility consists of the migration of the ETS support facility prototype to the operational platform, the loading of historic data (data used for the production of the list), and the conduct of performance testing, verification and validation activities. In order to meet the most urgent needs of the ETS Competent Authorities, a staggered implementation of the facility s functionalities throughout 2010 is foreseen to ensure a timely availability of the functions based on their priority. 2.4.2. The implementation phase would require staff resources of 0.45 FTE. 2.5. ETS support facility helpdesk 2.5.1. The role of the ETS support facility helpdesk is to provide support to the users of the facility on issues related to its operation, the data held within it, and the management of the content of the ETS support facility s user interface, which will be a secure internet portal. 2.5.2. It is important to note that this helpdesk does not include the provision of support or assistance for issues related to the ETS lists published by the European Commission associating aircraft operators to administering States. The generation of these lists by EUROCONTROL and the support provided by EUROCONTROL on list-related issues (through the ETS list support office that can be contacted via ets.info@eurocontrol.int) is covered contractually and financially through separate agreements between the European Commission and EUROCONTROL. 2.5.3. The ETS support facility helpdesk would require resources of 0.4 FTE per year. 2.6. User Coordination 2.6.1. The user coordination function is aimed at ensuring that the ETS support facility meets the users needs both in terms of functionalities and data completeness. This function thus comprises the collection, specification and management of users expectations and requirements; and the collection and management of data required to improve the quality and accuracy of the information and functions made available by the facility. The user coordination function also deals with the establishment and maintenance of service agreements with users. 2.6.2. The ETS support facility user coordination function would require staff resources of 0.8 FTE per year. EUROCONTROL working paper prepared at the request of DG 15 February 2010 2

2.7. System Development, Operations and Maintenance 2.7.1. The ETS system development, operations and maintenance function comprises the management of the facility IT elements; the enhancement of the fuel and emissions estimation methodology; and the specification, development, testing and implementation of future system enhancements as specified by users. 2.7.2. The function would require staff resources of 1.1 FTE per year. 2.7.3. In addition, a further 0.5 FTE per year in staff resources has been budgeted in anticipation of the need of other enhancements of the ETS support facility during the pilot phase. The actual costs associated with this will depend on the scope of changes requested by the users and their impact on the system, whether for new functionalities,, improving those that exist, or due to changes in the applicable legislation, at either European or national levels. 2.8. Facility management 2.8.1. This provides for the direct management of the Facility s development and operations, through a team leader responsible for the organisation and performance of the activity. The team leader will also provide expertise in all project areas. 2.8.2. The facility manager would require staff resources of 0.5 FTE per year. 2.9. Contractual Management 2.9.1. This function relates to the management of the contractual and financial arrangements that will be put in place between the ETS Competent Authorities and the Agency. It will also be responsible for organising meetings of an ETS Steering Group ensuring agenda is organised, reports are delivered to it in a timely manner and actions followed. This function is responsible for discharging EUROCONTROL s liability and responsibility over the project. It will monitor that the Facility is developed and operated by the Facility Manager and Team according to the contractual requirements established. 2.9.2. The function would require staff resources of 0.15 FTE per year. 2.10. Line Management 2.10.1. This covers senior management oversight of the facility and its staff, ensuring alignment with Agency policies and governance, and stakeholder requirements. 2.10.2. This would require staff resources of 0.13 FTE per year. EUROCONTROL working paper prepared at the request of DG 15 February 2010 3

3. COSTS ESTIMATE 3.1. Apart from the implementation phase, which is a one-off activity (see paragraph 2.4), all other functions defined in section 2 are continuous functions which are required for the 3 years of the pilot phase, which would terminate on 30 th June 2013. 3.2. Table 1 provides the overall cost estimated for implementing and operating the ETS support facility for the pilot phase. This overall cost is obtained by applying a charging regime to the resources that are deemed necessary for the facility (see section 2.1). Table 1 ETS Support Facility functions and Estimated Costs Function FTE Years of application Total Estimated cost (for the whole pilot phase) Implementation 0.45 1 85,333.50 Helpdesk 0.40 3 227,556.00 Users coordination 0.80 3 455,112.00 System Development, Operations and Maintenance 1.60 3 910,224.00 Facility Management 0.50 3 284,445.00 Contractual Management 0.15 3 85,333.50 Line Management 0.13 3 73, 955.70 ETS (Total) SF 2,121,959.70 EUROCONTROL working paper prepared at the request of DG 15 February 2010 4

3.3. The charging regime that has been applied to estimate the overall cost of the facility is based on EUROCONTROL s current charging policy for support provided to States, as established by the Provisional council in 2001. According to this policy: staff costs include taxes and are based on an average staff cost that is re-evaluated annually (EUR 860 per day: 2009 figures, including taxes); an administrative overhead of 5% is added on top of staff costs and all other expenses. 4. ACTUAL COSTS 4.1. The actual costs incurred for the deployment, operations and maintenance of the ETS support facility will be established based on the real effort that will be booked to it, accounted for in financial terms through the charging regime applicable. The actual cost will include overhead and external expenditure directly attributable to the implementation and operation of the facility, e.g. software outsourcing or missions. 4.2. Effort and external resources will be logged and tracked according to the EUROCONTROL Agency procedures. 5. USERS FEES 5.1. The recovery of the costs related to the implementation and operation of the ETS support facility would be based on an annual fee to which the following principles could be applied: Fees would be estimated in advance for the next calendar year so that they are known to users before they choose to subscribe; as fees would depend on the actual number of users and presumably States respective share of CO 2, it is important that there is co-ordination between Users so that a collective decision could be taken; Based on this estimation, harmonised contractual arrangements would be established between EUROCONTROL and the ETS Competent authorities, i.e. users could only access the service if such agreement would exist; The exact terms, including the financial aspects, of such agreements are not yet known; EUROCONTROL is currently working on a proposal. The exact same procedure (i.e. Special Agreement) as that applied for ad-hoc support by the Agency to individual States does not, at this stage, seem applicable to the EUROCONTROL working paper prepared at the request of DG 15 February 2010 5

ETS Support Facility as this support would be relevant to several States simultaneously and for an extended period. The estimated fee for 2010 (first year) would be based on the principle of recovery of one third of the estimated total costs of the implementation and operation of the ETS support facility (i.e. EUR 707K, see Annex 1 for an estimation of what would be the service fee for each Member States for 2010 on such basis); The amount finally recovered would be dependent on the actual costs and number of users having subscribed to the facility (e.g. if supplementary users have entered after the first collective decision ). At the end of each calendar year, the fee would be re-evaluated for the next year based on actual and predicted uptake of the service, and on the planned facility enhancements and operational costs. 6. OVERSIGHT AND TRANSPARENCY 6.1. Measures will be implemented to ensure oversight and transparency by the competent authorities, commissioners and governors of the facility. The Agency considers that two groups would need to be established: a users group to agree on proposed changes, adaptations, and enhancements to the facility scope and functionalities; a steering group dealing with issues related to costs, the principles of users charges distribution, budgeting, contractual arrangements and on the implementation of the users group proposals having regards to their financial implications. 7. CONCLUSIONS 7.1. This briefing note has provided an explanation of the basis on which the EUROCONTROL Agency has arrived at its estimate of EUR 2.12M to deploy, operate and maintain the proposed ETS Support Facility for the period 2010-2013. In his replies to letters of support for the facility from a number of ETS Competent Authorities, the EUROCONTROL Director General has stressed that the Agency must be in a position to recover the costs of the facility from those organisations that make use of it. 7.2. The decision on whether to proceed with the facility or not rests with the EUROOCONTROL Member States. In order for the Director General to be in a position to seek the approval of the EUROCONTROL Member States to proceed with the ETS Support Facility, the ETS Competent Authorities have to indicate that they are prepared to fund the facility. Once the Director General receives proof thereof, he will then be in a position to proceed. EUROCONTROL working paper prepared at the request of DG 15 February 2010 6

ANNEX 1 SIMULATIONS OF COST RECOVERY OPTIONS BASED ON A SERVICE FEE WITH FIXED AND VARIABLE COMPONENTS This Annex provides an indication of what the ETS support facility s fee could be for competent authorities for 2010. Assumptions It is assumed that the annual fee will be composed of a fixed amount, shared equally among all users in each option, and a variable amount that is instead proportionate to a user-specific aspect. The share covered by the fixed amount ranges from 0%, to 50%, and to 100%. The amounts provided in the table below are based on the following assumptions: a) the 2010 fee is established in order to recover one third of the overall cost estimated to implement the ETS support facility and operate it up to 30 th June 2013, i.e. one third of EUR 2.12M which is EUR 707K. b) all of the EU Member States competent authorities are users of the facility; c) the variable part of the annual service fee for competent authorities is determined by applying the principle stated in Article 3d, point 3 of the Directive, to link the fee to the share of emissions allowances that each Member State could auction. The reference year is taken to be 2008; EUROCONTROL working paper prepared at the request of DG 15 February 2010 7

Table 2: Estimated fees for Competent Authorities for 2010 (recovery of EUR 707K) Member CO 2 Fixed 100% Fixed 50% Fixed 0% State Share (i.e. 26185 ) (i.e. 13093 ) (i.e. 0 ) Variable 0% Variable 50% Variable 100% AUSTRIA 1,51% 26.185 18.430 10.676 BELGIUM 2,83% 26.185 23.097 20.008 BULGARIA 0,31% 26.185 14.188 2.192 CYPRUS 0,43% 26.185 14.613 3.040 CZECH REPUBLIC 0,67% 26.185 15.461 4.737 DENMARK 1,55% 26.185 18.572 10.959 ESTONIA 0,13% 26.185 13.552 919 FINLAND 1,25% 26.185 17.511 8.838 FRANCE 14,04% 26.185 62.724 99.263 GERMANY 18,70% 26.185 79.197 132.209 GREECE 1,73% 26.185 19.208 12.231 HUNGARY 0,47% 26.185 14.754 3.323 IRELAND 1,53% 26.185 18.501 10.817 ITALY 7,28% 26.185 38.827 51.470 LATVIA 0,16% 26.185 13.658 1.131 LITHUANIA 0,12% 26.185 13.517 848 LUXEMBOURG 0,83% 26.185 16.027 5.868 MALTA 0,13% 26.185 13.552 919 NETHERLANDS 7,59% 26.185 39.923 53.661 POLAND 0,94% 26.185 16.415 6.646 PORTUGAL 1,81% 26.185 19.491 12.797 ROMANIA 0,40% 26.185 14.507 2.828 SLOVAKIA 0,11% 26.185 13.481 778 SLOVENIA 0,08% 26.185 13.375 566 SPAIN 9,30% 26.185 45.968 65.751 SWEDEN 1,61% 26.185 18.784 11.383 UNITED KINGDOM 24,48% 26.185 99.629 173.074 100,0% 707.000 707.000 707.000 (taking into account rounding errors) EUROCONTROL working paper prepared at the request of DG 15 February 2010 8