Mixed messages over EU ETS costs for airlines

13th January 2012


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  • EU ,
  • Carbon Trading ,
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Report argues US airlines could be €2 billion better off as a result of participating in the EU carbon trading scheme, as Ryanair announces new charge to cover its costs.

According to analysis carried out by academics from MIT, the inclusion of US airlines in the EU emissions trading scheme (ETS) will not substantially cut carbon output and could see companies making substantial profits as a result of the number of free allowances allocated under the scheme.

The study, published in the Journal of Air Transport Management, examines the potential impacts of the scheme on airlines up to 2020, assuming a carbon price of €15 per tonne and continued growth in the sector.

It concludes that if carriers pass on the full costs of the scheme to their passengers and the rules outlining the allocation of free allowances do not change, US airlines could make €2.05 billion in windfall profits.

With the number of free allowances given to firms based on their 2010 emissions, the report estimates that US airlines would only need to purchase a third of the allowances they need up to 2020.

The report’s methods have been questioned with John Hanlon, the secretary-general of the European Low Fares Airline Association, describing that the assumption that allowance costs could be passed back to the consumer as a “fallacy”.

However, the report’s publication was followed by an announcement from budget airline Ryanair that from next Tuesday (17 January) it would be charging an additional €0.25 on each of its flights in order to cover the costs of the ETS.

The firm, which labels the ETS as an “eco-looney” tax [sic], estimates the carbon trading scheme will cost it up to €20 million during 2012.

Ryanair’s Stephen McNamara said: “European aviation should not be included in the ETS scheme since it accounts for less than 2% of the EU’s CO2 emissions.

“This latest EU stealth tax will damage traffic, tourism, European competiveness and jobs at a time when no other economic block is including aviation in their ETS schemes.”
Meanwhile the UK’s Civil Aviation Authority launched a consultation on its plans to support a sustainable increase in air travel capacity, including improving efficiency incentives through economic regulation.

Andrew Haines, CAA chief executive, said: “Unless the [aviation] sector faces its environmental impact head-on, it will not be allowed to grow. Whether that impact is local, in terms of air quality or noise, or global like climate change, the CAA is determined to work with the sector to help it manage its environmental footprint and realise its potential growth.”

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