Airlines could cash in on emissions trading

Airlines could make billions of pounds following the inclusion of aviation in European emissions trading despite small reductions in air traffic that higher ticket prices would bring, two separate reports warn this week.

The aviation sector stands to make a profit of £2.7bn or £3.5bn if carbon credits are given out for free and generous emission allowances allocated, according to reports published by the ippr and the WWF respectively. The EU is expected to make a decision on the issue on Wednesday.

Airlines are likely to pass the full cost of the credits onto passangers, leading to slight ticket price increases insufficient to restrain the sector’s growth, the two organisations said.

Ticket prices could go up by 14p to £6.04, which could bring demand for flights down by 0.1 to 1.4% – nowhere near enough to seriously dent the aviation industry’s 4-5% annual growth that is expected to continue until 2020, according to the Institute for Public Policy Research (ippr). In some countries airlines are growing by 14% a year.

Aviation is the fastest growing contributor to climate change but has so far been excluded from the ETS, which only covers emissions from the biggest energy users and producers.

The ippr urged the EU to include all flights to and from Europe in the scheme rather than internal EU flights only, which account for 40% of total emissions, and for the scheme to be extended to all greenhouse gases rather than just carbon dioxide. It was echoed by the WWF on these calls.

Covering all greenhouse gases is particularly important in the case of emissions from aircraft, which impact the climate differently from ground sources due to the height they are released at. Including all greenhouse gases in the scheme would increase its effectiveness fivefold according to the ippr.

The ippr’s Simon Retallack said: “When it comes to preventing climate change, there is no such thing as a cheap flight. Including aviation in the European Union Emissions Trading Scheme is a step in the right direction.

“But the EU should not repeat the mistake it made with the energy sector and give the aviation industry free emissions credits, handing the airlines a windfall of up to £2.7 billion,” he said.

“The EU should take a strong lead on curbing emissions from airline flights and clip the aviation industry’s wings.”

European power companies reaped £1bn in windfall profits when they were included in the ETS, indicating the EU could have been much tougher in emission allowances, the ippr said.

The WWF’s Keith Allott said: “The inclusion of aviation in the EU carbon market should be the first step in addressing the industry’s soaring emissions.”

But “the potential for airlines to make profits from the scheme shows that the EU can afford to be tough. A robust limit on emissions should be set and airlines must be required to pay for their allowances at auction or the system will not be credible,” he said.

Goska Romanowicz

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