European airlines making more than £1bn profit on ETS
Airlines will generate up to €1.3bn (£1.1bn) in profits in 2012 by taking part in the EU Emissions Trading System (ETS), according to a new study.
Commissioned by the NGO Transport & Environment (T&E) and carried out by the consultancy CE Delft, the study also shows that EU airlines would take the lion’s share (€758m) of these extra gains, which is almost twice their estimated €400m profit for 2011.
Under the ETS, airlines are required to surrender sufficient allowances to cover all their CO2 emissions in 2012, with the majority of CO2 permits – equivalent to 85% of the sector’s historic 2010 emissions – being given to air carriers for free.
The remaining 15%, to cover any emissions increases since 2010, needed to be purchased on the carbon markets and T&E, which fought to include the aviation industry in the ETS, claims these costs were recovered by airlines through higher airfares throughout 2012.
T&E claims airlines have not only been raising ticket prices to fund the permits they need to purchase, but have also been passing using the 85% of free allowances as an excuse to pass on extra costs to customers.
According to the study, these windfall profits amount to some €870m for all airlines, if the full value of the free permits were charged to passengers.
In addition to anticipated windfall profits from passing on the cost of free allowances to passengers, airlines will also be making extra windfall profits from last year’s ‘stopping the clock’ proposal from the European Commission.
The proposal, introduced last November by the European Union, delayed the inclusion of flights to and from Europe in the ETS from 2012 to 2013 to give the International Civil Aviation Organisation (ICAO) more time for the development of a global solution to aviation emissions.
It means that carbon surcharges levied in 2012 on customers of intercontinental flights to cover the cost of CO2 allowances now no longer need to be used to purchase these permits.
According to T&E, the move turns revenues raised by airlines to cover the costs of their CO2 permits into additional windfall profits for the industry amounting to an estimated €486m.
T&E aviation manager Bill Hemmings said: “Passengers have paid towards fighting climate change, it is unjust for airlines to retain these windfall profits. Air carriers should act responsibly and contribute these additional profits to the UN’s Green Climate Fund, created to support developing countries’ initiatives to tackle the impacts of climate change.”
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