Emission scheme to cost airlines over €1bn annually: study

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Airlines could face a collective annual cost of over €1 billion ($1.4 billion) from 2012 under the sector's inclusion in the European Union's emissions trading scheme (ETS), according to new independent research.

A new report, published by aviation consultancy RDC Aviation and energy sector market intelligence specialist Point Carbon, estimates the aviation sector could face a shortfall of 77 million tonnes of carbon dioxide when it enters the scheme in 2012. This equates to €1.1 billion at today's spot price of €14.40 per tonne.

"The cost is just an indication," explains the report's co-author, and senior analyst at Point Carbon, Andreas Arvanitakis. "The actual cost will be whatever the carbon price will be in 2012." But he describes the €1.1 billion annual cost figure as "conservative" given current forecasts of the spot price for carbon in 2012 of nearer €20 per tonne.

Additionally the shortfall seems likely to grow in 2013, and over the rest of the next decade, as air transport increases and the number of allowances are reduced - in 2012 the free allowances to airlines will be 85% of 97% of the 2004-06 average emissions, moving to 85% of 95% of the 2004-06 average from 2013. The European Commission is expected to publish the baseline average figure for 2004-06, on which the sector's caps will be based, next month.

Under the controversial expansion of the emissions trading scheme to include aviation, all airlines operating flights into the EU regardless of their country of origin will be covered from 2012. The Commission is expected to publish a final list of the number of airlines covered shortly.

In the next stage of the process for calculating each airline's free allowance, carriers next year will submit revenue tonne-kilometre figures. "This will decide how big a slice of the cake each airline will get," explains Arvanitakis. Airlines have been required to show their plans for collecting this data, although the UK has already slipped the deadline for these plans to be submitted.

The UK will, by far, be the biggest national regulator of the scheme, handling most of the larger non-EU carriers in addition to UK operators. It remains committed to starting the scheme on schedule from 2012.