In-Depth Report Examines The Likely Scenarios And Impacts Of The EU Emissions Trading Scheme

Aviation intelligence firm OAG has released a report exploring 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.

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 3.5 billion Euro cost to the aviation sector could increase passenger fares by up to 5.2% on key long-haul routes.

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. "There are 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 the EU."

Meanwhile, Reuters reports that the Obama administration is considering its options for possible retaliation, and is still deciding whether to operate unilaterally, or coordinate efforts with other governments opposed to the law.

One strategy under review would levy a fee against European airlines who wish to operate in the U.S. The tactic was used effectively in a dispute with Argentina over landing fees which was recently resolved.

Some U.S. airlines have already raised fares to Europe to cover the cost of carbon credits imposed by the EU. Both the U.S. State Department and the DOT have told the EU that the U.S. is prepared to respond "appropriately" to the imposition of the carbon tax. The U.S. House of Representatives has passed legislation which would prevent U.S. airlines from paying the European tax, and the U.S. Senate has similar legislation under consideration.

FMI: www.oagaviation.com/ets, www.whitehouse.gov