According to figures published by Thomson Reuters Point Carbon, airlines which engage in the 2012 EU’s emissions trading scheme will jointly foot a bill that could rise as high as 1.1 billion Euros (€) in just the first year. This is equivalent to £953.17 or $1.48 billion.
Thomson Reuters Point Carbon, also known as Point Carbon, is an energy and carbon dioxide (CO2) market intelligence provider, or think tank, with 55,000 clients, including many of the world’s major energy companies and financial institutions.
The airline carbon trading scheme, which is part of the greater European Union Emissions Trading Scheme, is based on €12 per tonne of carbon emissions, for a total of €10.4 billion between now and the end of 2020, assuming the rate of carbon trading remains unchanged from €12 per tonne over the course of the next two decades.
The initial phase of airline carbon reporting is – like many introductory carbon reporting/trading/taxation programs – partially free. In 2012, for example, the EU will be issuing 176 million allowances (valued at €2.1 billion) to airlines at no charge, leaving only 88 million, or €1.1 billion worth of allowances which need to be purchased.
These scalable fee structures are purportedly the way to soften the blow (re the cost of CO2 emissions) and pave the way for more intense carbon trading and/or taxing. In fact, as some experts have pointed out, these unrealistic and artificially low costs lead industry to believe that carbon trading schemes are eminently affordable, when in fact they may not be in their final form.
All the carriers affected under the reported carbon trading scheme are to receive 56 percent of the allowances they need to continue to operate. However, since each airline is treated somewhat differently under the scheme, with some getting a mere 20 percent of the allowances needed while others get 100 percent, costs for the remaining needed allowances will vary greatly.
In this particular instance, as in some others, bigger airlines with a greater international reach, like British Airways and Lufthansa, will get the lion’s share of credits – up to 81 percent on average – while the other 25 EU carriers get about 61 percent.
Fortunately, this latter faction’s allowances compare favorably with those for China’s Big Six: Cathay Pacific; Air China; China Airlines; China Eastern; China Southern, and Hainan, which will get 63 percent of their allowances.
The same is true for U.S. air carriers. Delta, American, United, Continental, US and Northwest will all get between 57 and 66 percent of allowances.
Trading begins on January 1 of 2012, and has been a subject of enormous contention in the U.S, where a trade group is arguing that American air carriers can’t legally be included in the EU carbon trading program, and that attempts to do so are a sort of “force majeure” on the part of the European consortium. The EU intends to apply the carbon trading structure to any airline landing on EU soil.
The Chinese aren’t much happier about the cost, which will levy 800 million yuan in extra charges against airline travelers, who will pay all or part of that fee.
The EU has said it will fine those who fail to ante up. No one knows what will happen on January 1 if some countries refuse to pay and still insist on landing in Paris, for example. The airlines industry accounts for about two percent of global carbon emissions. The tax is meant to help the EU cut carbon (and other greenhouse gas) emissions by at least 20 percent below 1990 levels by 2020.
A bigger goal, 30 percent, has been cited as unmanageable, and so far a United Nations accord to establish that goal has failed. The airlines scheme may be equally unmanageable, as, one by one, non-EU airlines refuse to land in carbon-assessed European airports.
One positive effect of the airline carbon trading scheme may be to curb international flights. This same thing happened after 9/11 and carbon emissions from airline travel dropped precipitously. That’s good news for the planet!