20 billion euro EU handout for airlines

900 airlines get free emissions allowances: EU says cash positive effect on airlines

Aviation will become part of the EU's emissions trading system (EU ETS) from 2012 and the European Commission has now published the benchmark values which will be used to allocate greenhouse gas emission allowances free of charge to more than 900 aircraft operators.

Climate Action Commissioner Connie Hedegaard said: "With the benchmark values, airlines now have certainty how many allowances they will receive for free each year up to 2020.”

“At current market prices these free allowances represent more than €20 billion over the decade. With these potential revenues, airlines could invest in modernising their fleets, improving fuel efficiency and using non-fossil aviation fuel. As much as the EU prefers global action, we can't defend that the aviation sector is exempted from contributing because they can't agree internationally. This is why the EU decided to take this step forward in 2008 while we will continue to fight for global regulation of aviation like at the next UN climate negotiations in Durban ''

Three major airline associations charged that the European Commission was "grossly misleading" by stating the scheme could actually translate into 20 billion euros in revenue over the next decade.
"It is high time that the Commission woke up to reality," said the Association of European Airlines (AEA), the European Regions Airline Association (ERA) and the International Air Carrier Association (IACA).

"Saying airlines are the beneficiaries of a scheme that deprives them of revenues shows a blatant misunderstanding of economic reality," they said in a joint statement.

Publication of the benchmark values enables airlines to calculate their free allocation of allowances up to 2020. In 2013 to 2020 an airline will receive 0.6422 allowances per 1,000 tonne-kilometres, while in 2012 it will receive 0.6797 allowances.

85% of the aviation allowances will be allocated free of charge to aircraft operators in the trading period from 1 January 2012 to 31 December 2012,. In the period from 1 January 2013 to 31 December 2020, this will be 82%. 15% of the remaining allowances in each period will be auctioned and in 2013-2020 3% will be set aside in a special reserve for new entrants and fast growing airlines.

Said the EU: “The inclusion of aviation in the EU ETS is expected to have a limited impact on ticket prices. Based on current carbon prices, the actual costs per ticket of a transatlantic flight would increase by less than 2 Euro, assuming that the value of the free allowances would not be passed to the passenger. If it were to be passed through, the ticked price could increase by around 12 Euro.”

On Thursday, an advocate general to the European Court of Justice will issue an opinion on a request by US airlines for non-European carriers to be excluded from the EU scheme. This should give a steer on the subsequent ruling by the ECJ, which the European Commission is confident will side with the EU rather than the US airlines.

Last Friday, 21 countries including the US, Japan, Brazil, Russia, India and China issued a declaration opposing how the EU scheme will apply to flights that start or end in one of the bloc’s 27-member states. They say the scheme was inconsistent with international law and should not apply to flights by non-EU carriers.

Tony Tyler of IATA  said he feared retaliatory measures against European airlines by countries outside the EU if the US carriers lose their court case.

“That is the worst possible outcome for us – the airlines being caught in the middle of a trade war,” said Mr Tyler. “Other countries saying to Europe ‘OK, if you are hitting our airlines with additional cost, which you should not be doing, we will hit your airlines’ – none of us wants that.”

He also noted that China, partly in protest at the EU scheme, threatened in June to derail a deal under which Hong Kong Airlines would order 10 superjumbo A380 aircraft from Airbus, a subsidiary of EADS, the European aerospace and defence group.

Mr Tyler said the EU should abandon its plan to bring airlines within its emissions trading scheme, adding the issue should be tackled through a global industry framework devised by the International Civil Aviation Organisation, a UN agency.
IATA estimates airlines face a bill of at least $26bn to comply with the EU scheme over the next decade.

Valere Tjolle
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