Imposing overly stringent climate legislation in Europe will simply drive away business, jobs and emissions to other countries, according to the findings of a new air transport industry-sponsored report.
Inclusion of Aviation in the EU ETS: Cases for Carbon Leakage, by consultancy Ernst & Young, argues that aviation's inclusion within the European Union's emissions trading scheme will have a significant financial and economic impact on airlines, especially EU-based carriers - and carry the risk of international carriers completely bypassing the EU.
It judges that the financial and economic impact on aviation is strongly linked to the level of sector auctioning and that a high level in future would result in a loss of traffic. "Some routes may become unviable and could be withdrawn, with major economic and social consequences on regional connectivity and local employment," the report authors concluded.
Taking a worst case scenario of €50/t ($64/t) carbon dioxide and auctioning rising to 100% by 2020, total costs of the scheme for the airline sector could rise to €103 billion, an increase of nearly 60% over a 15% level: "Even an over-estimated operating profit would practically disappear in this scenario, simply due to the high level of auctioning."
An annual cost of €11 billion - €6 billion of which would be spent on auctioning - would also represent 33% of its annual fleet investment - one-third of the airline industry's financial capacity to invest in new technologies.
"High levels of auctioning combined with international competition would entail risks of carbon leakage and would result in demand - passenger or cargo - shifting to non-EU carriers or alternative routes without necessarily reducing carbon emissions, or even leading to an increase in global carbon dioxide emissions," the report concludes.
The study is aviation's response to a European Commission move to draw up a framework to determine which industries could possibly obtain free emission rights when the EU's carbon market is relaunched in 2013. While new legislation for aviation stipulates that 15% of allowances shall be auctioned in the next phase of the scheme from 2013, that percentage could still be increased as part of a general review of EU climate change policy until 2020.
- EU funded researchers will next week meet in Budapest to examine whether an aircraft noise trading scheme could provide a new and 'beneficial' means of balancing environmental and operational concerns for European air transport. The MIME project is a EC Sixth R&D Framework-sponsored project that is examining how a noise cap-and-trade scheme could develop more effective airline-specific noise-control solutions than current taxes or charges.
Download the report in full
Source: Flight International
