Airlines Pocketed €1.36 Billion from EU Carbon Scheme: Report


Human Wrongs Watch

By EurActiv*, 22 January 2013 — Airlines profited up to €1.36 billion last year by passing “imaginary” costs from the EU’s Emissions Trading System (ETS) onto consumers, says a study by a Dutch environmental consultancy published today (22 January).

Airline industry: over the moon? | EurActiv

Airline industry: over the moon? | EurActiv

EU airlines stood to gain the most from the carbon trading scheme – some €758 million or almost twice their estimated returns of €400 million in 2011 – says the CE Delft study.

Under the ETS, the EU’s market-based measure to curb greenhouse gas emissions, airlines are given a certain number of free carbon allowances. The rest they have to purchase on a ‘carbon market’.

The free allowances covered some 85% of the sector’s emissions in 2010. The remaining 15%, plus any allowances to cover any emissions increases since 2010, needed to be purchased, with airlines recovering their costs through higher air fares in 2012, according to the environmental campaign group Transport & Environment, which commissioned the study.

Aoife O’Leary, an aviation advisor at T&E, told EurActiv that airlines were passing on the “imaginary costs” of the free ETS allowances onto customers, generating huge profits.

“Evidence suggests that airlines have not only been raising ticket prices to fund the permits they need to purchase, but they have also been passing on much of the ‘cost’ of the 85% free allowances to customers, and consequently, generating windfall profits,” said a statement by T&E.

O’Leary said airlines treated carbon allowances like any other asset, passing their costs onto customers or selling the surpluses.

“Despite receiving allowances for free, companies charge their customers for the full value of these allowances to enhance their profitability”, the statement said.

These windfall profits amount to some €870 million for all airlines, if the full value of the free permits were charged to passengers.

Stopping the Clock

The ETS for airlines took effect in 2012 amid opposition from international carriers. Flights entering or leaving the EU are temporarily excluded from the ETS to give the International Civil Aviation Organization (ICAO) more time to develop a global approach to aviation emissions under a European Commission proposal known as ‘stopping the clock’.

Airlines continued to pass the carbon costs onto customers of intercontinental flights despite no longer having to pay for the permits under the ETS. The extra revenue generated to pay off the carbon allowance then translated into additional profits for the industry, the study said.

The Association of European Airlines, which represents major passenger carriers, declined to comment on the study, saying: “Part of the conclusions is based on assumptions and not on facts or reality. It is not known at which price airlines have bought certificates.

“The authors tend to forget that many European airlines have invested a lot of money in ETS, reporting software and human resources.”

The ETS is the target of repeated criticism from industry and environmentalists that it does little to protect the environment.

The value of carbon on the market fell by 36% last year, according to Bloomberg New Energy Finance. As a result, speculation has mounted that the Commission will intervene in the ETS, by ‘backloading’ some 900 million allowances until 2019 and 2020.

Background

In an effort to tackle aviation’s small but fast-growing contribution to climate change, the European Commission issued a legislative proposal in December 2006 to bring it into the EU’s Emission Trading System (ETS).

This involved imposing a cap on carbon dioxide emissions for all planes arriving or departing from EU airports, while allowing airlines to buy and sell ‘pollution credits’ on the bloc’s carbon market, and so reward low

carbon-emitting aviation.

The legislation took effect on 1 January 2012. But non-EU governments and airlines have threatened legal action or trade retaliation unless they are granted exemptions. China’s official aviation body, the China Air Transport Association (CATA), says that the ETS would cost its airlines $123 million in the scheme’s first year, and more than triple that by 2020. The country also claims special dispensation as a developing country.

EU officials say that China has a higher GDP than Greece or Portugal and questions why its businessmen should be exempted from paying the same carbon taxes that others do.

The EU also allows ETS exemptions for governments that take equivalent measures to curb aviation emissions. But Brussels has not said what these might be. China’s aviation regulator has already asked all airline carriers to cut their energy and carbon intensity by 22% by 2050.

More on this topic

Aviation firms urge EU to reconsider ETS

Envoy says China wants to avert trade spat over ETS

‘Trade war’ fears as Moscow aviation meeting debates ETS

Airbus urges EU to scrap biodiesel incentives for road transport

Airlines set to win carbon credits from biofuel flights

Air industry raises warnings over EU emissions charge

EU says it won’t back down in airline emissions row

Aviation and Emissions Trading

*Source: This report has been re-published here from EurActiv under its (c) Term for the  Use of the Website: Occasional republishing (once a week or less frequently), for non-commercial use is allowed only with indication of the source and by linking to the original article. Go to Original.

2013 Human Wrongs Watch

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