EU Emissions Costly Cap

The aviation industry could be hit with billions of euros of extra costs from new proposals aimed at curbing carbon dioxide after 2013 and will struggle to cope, airlines said on Wednesday.

Under proposals being drawn up in Brussels to fight climate change, all airlines using airports in the 27 nation European Union would be included in the Emission Trading Scheme (ETS) from 2012, with a cap on their emissions of greenhouse gases.

The European Parliament's environment committee voted on Tuesday to make the sector pay for 25 percent of its permits to produce carbon dioxide in the first year, rather than the 10 percent suggested by EU ministers.

The panel rejected a proposal that airlines pay for 100 percent of their permits to pollute from 2012, but it approved a proposal that from 2013 the percentage of permits be raised in line with the maximum level in other sectors.

"This text actually means that aviation is likely to be brought in line with the electricity sector, and this sector is expected to face 100 percent auctioning from 2013," said a spokeswoman for the International Air Carrier Association (IACA).

The vote by the environment committee was not the parliament's final say, but the panel is viewed as the most influential one to look at the proposals.

The cost of the package for EU carriers is estimated at more than EUR175 billion euros (USD$275 billion) in the first 12 years of the ETS, a British Airways spokesman said.

"British Airways has provided long-standing support for the inclusion of aviation in the EU ETS," he said. "However, this is now being severely tested as the potential price appears to be rising almost exponentially." he added.

IACA, which represents 38 airlines, estimates that if 100 percent auctioning were introduced in 2013, it would mean EUR15 billion a year in additional costs for airlines touching down in the EU.

"The current economic downturn and record fuel costs are already hitting the industry hard and we are seeing the impact of these on a daily basis," IACA President Christoph Mueller said.

The parliament panel voted for aviation to mirror other sectors under the ETS to avoid the problem of "windfall profits", which occur when sectors pass on to customers the cost of carbon permits they have been given for free.

But aviation could not reap windfall profits, said the European Low Fares Airline Association (ELFAA), which represents 12 airlines including Ryanair and easyJet.

"Whilst the windfall gains of the power generation industry cannot go unaddressed, the aviation industry cannot simply add the costs incurred by ETS to ticket prices," ELFAA Secretary General John Hanlon said.

"The European Parliament must refrain from imposing costly measures that have no environmental benefit but could deprive airlines of the financial means to invest in new planes," he added.

(Reuters)

1 June 2008