OAG Projects Air
Passenger Fares May Rise Up To 5.2% As A Result Of EU’s ETS
By Steve Hall
January 10, 2012 - OAG, the global leader in aviation
intelligence and a UBM Aviation brand, on Monday
released the latest in its series of Aviation Market
Reports. This new report explores the implications of
the European Union’s Emissions Trading Scheme for the
aviation industry. Airlines operating flights within
Europe become subject to the EU ETS initiative this
month, January 2012.
The extension of the ETS, now operating in 30 countries
(the 27 EU Member States plus Iceland, Liechtenstein and
Norway), to cover CO2 emissions within the Aviation
Industry compels almost 500 passenger-carrying airlines
to join the scheme. OAG analysis of the ETS calculation
process reveals that the knock-on effect of this
estimated EUR €3.5bn cost to the aviation sector could
increase passenger fares by up to 5.2% on key long-haul
The inclusion of aviation within the ETS is not without its controversy. In addition to airline groups and individual countries publicly voicing their opposition to the initiative, the US House of Representatives (24th October 2011) passed a bill prohibiting US airlines to participate in the EU scheme.
only two scenarios for airlines from 2012 – to pay ETS charges
or to use non-EU points to stop-off to pay less,” said John
Grant, Executive Vice President, UBM Aviation. “This not only
has significant ramifications for airlines’ operating costs, it
also carries the very real threat of slowing, or in extreme
cases eradicating, airport network driven economic growth within
European Union Emissions Trading Scheme (EU ETS) also known as
the European Union Emissions Trading System, was the first large
emissions trading scheme in the world. It was launched in 2005
to combat climate change and is a major pillar of EU climate
policy. The EU ETS currently covers more than 10,000
installations with a net heat excess of 20 MW in the energy and
industrial sectors which are collectively responsible for close
to half of the EU's emissions of CO2 and 40% of its total
greenhouse gas emissions.
EU ETS, large emitters of carbon dioxide within the EU must
monitor their CO2 emissions, and annually report them, as they
are obliged every year to return an amount of emission
allowances to the government that is equivalent to their CO2
emissions in that year. In order to neutralize annual
irregularities in CO2-emission levels that may occur due to
extreme weather events (such as harsh winters or very hot
summers), emission credits for any plant operator subject to the
EU ETS are given out for a sequence of several years at once.
Each such sequence of years is called a Trading Period.
The 1st EU ETS Trading Period expired in December 2007; it had covered all EU ETS emissions since January 2005. With its termination, the 1st phase EU allowances became invalid. Since January 2008, the 2nd Trading Period is under way which will last until December 2012. Currently, the installations get the trading credits from the NAPS (national allowance plans) which is part of each country's government.
this initial allocation, an operator may purchase EU and international
trading credits. If an installation has performed well at reducing its
carbon emissions then it has the opportunity to sell its credits and
make a profit. This allows the system to be more self contained and be
part of the stock exchange without much government intervention.
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