Oct 9, 2014 - Wayne, United States
Flying in the face of industry claims about the unbearable cost (1)of including aviation in the EU Emissions Trading System (ETS), air carriers will generate up to an estimated €1.3bn in windfall profits in 2012 alone, a new study by independent consultancy CE Delft reveals. The report, commissioned by Transport & Environment (T&E), also shows that EU airlines would take the lion’s share (€758m) of these extra gains, which is almost twice their estimated €400m profits for 2011(2).
With the inclusion of aviation in the EU ETS, all airlines are required to surrender sufficient allowances (or ‘permits to pollute’) 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%, plus allowances to cover any emissions increases since 2010, needed to be purchased on the carbon markets - with these costs being recovered by airlines through higher airfares throughout 2012.
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 (3). According to the CE Delft 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 November’s ‘stopping the clock’ proposal from the European Commission.
This proposal delays 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 need now no longer be used to purchase these permits. The ‘stopping of the clock’ proposal therefore turns revenues raised by airlines to cover the costs of their CO2 permits into additional windfall profits for the industry. These extra revenues amount to additional windfall profits of an estimated €486m.
The CE Delft report concludes that airlines would be set to fatten their financial books by as much as €1.3 billion (€872m + €486m) in 2012 alone at the expense of their passengers.
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.”
Aviation Environment Federation director Tim Johnson said: “Airlines have a major stake in ensuring aviation becomes sustainable. Having relied on the argument that any solution must be global to undermine Europe’s efforts on the ETS, they have a special responsibility now to see that real progress is made within ICAO. Simply pocketing over a billion euros of passengers’ money would not only damage industry credibility but also rightly prompt questions as to their real motives.”
Source : Brussels