Commission Says Airlines Will Benefit, Airlines Say 'Not So
Much'
European airlines have hit back against the European
Commission’s latest comments on aviation’s entry into
the European Emissions Trading Scheme (EU ETS), arguing that the
comments are grossly misleading.
In a statement dated September 26th, Climate Action Commissioner
Hedegaard claimed airlines will benefit from $27 billion (€20
billion) worth of free carbon permits during their first decade in
the EU ETS, which aviation will join on January 1st next year. She
refers to these free allowances as “revenues” and
suggests airlines could channel these funds into fleet
modernization.
These statements have caused uproar among Europe's airline
associations. “To refer to carbon permits as revenue is
totally absurd,” says Association of European Airlines
Secretary General Ulrich Schulte-Strathaus, voicing the united view
of the three airline bodies. “This is simply not true. The
allocated certificates have to be surrendered; this is not money
which airlines can re-invest.”
The Commission is capping aviation emissions below 2004-06
levels. Initially it will grant 82% of the permits that airlines
would have needed in 2004-06 for free, while the remaining 18% must
be bought at auction or from other sectors. This means that even if
an airline maintained its emissions at 2004-06 levels, it would
still need to buy that remaining 18%. But the industry has grown
since 2004-06, widening that shortfall.
“The Commission has got this completely wrong. Far from
profiting from the scheme, an average airline will need to acquire
27% of its permits from the market,” argues Mike Ambrose, who
is Director General of the European Regions Airline Association.
“Contrary to the Commission’s statement, this will
hamper industry investment in new technologies and
biofuels.”
Carbon permits are expected to increase in price, hitting around
$38 (€28) by 2020. On this basis, the airline industry will be
left footing a nearly-$24 billion (€17.5 billion) bill between
2012 and 2020. This would be a tough pill for any industry to
swallow, but according to IATA’s latest forecast, European
carriers will post a meagre 0.8% margin in 2012. “Companies
depend on air links to do business. Adding costs against a backdrop
of economic uncertainty will only hinder the recovery,” says
International Air Carrier Association Director General Sylviane
Lust.
Meanwhile the Commissioner makes no reference to the ongoing
legal and political challenges against the EU ETS. The heads of all
three airline associations conclude: “It is high time that
the Commission woke up to reality. Saying airlines are the
beneficiaries of a scheme that deprives them of revenues shows a
blatant misunderstanding of economic reality.”