Airlines might pass on to customers the cost of carbon allowances that they receive for free, providing a windfall that can be used to buy new aircraft, said the head of the EU’s climate department.
Airlines can use the extra revenue after charging customers for emission permits to cut greenhouse-gas output, Jos Delbeke, the European Commission Director-General for climate, said at a web-cast press conference in Brussels, Bloomberg reported.
The region will give out about 1.6 billion metric tons of free carbon allowances to airlines through 2020, based on data on the EU website.
“A significant share of allowances will be given for free, which represents €20bn [$27bn]” during the next nine years, Delbeke said.
Europe is easing the way for airlines to “upgrade fleets” and introduce efficiency procedures that cut emissions, he said. New aircraft can slash emissions by as much as 20 percent, he said.
It’s unclear whether competition between airlines will allow them to pass on the entire carbon price to their customers, or only a portion of it, Delbeke said.
The European Union on Monday set benchmarks to calculate the distribution of free carbon-dioxide permits among domestic and international airlines from 2012, when they join the bloc’s emissions-trading system.
The regulator of the 27-nation bloc set a level of 0.6422 carbon allowances per 1,000 ton-kilometers for the eight years through 2020, the commission said.
Airlines will receive 0.6797 carbon allowances per 1,000 ton-kilometers in 2012, it said. The free allowances will be distributed over the nine years starting 2012 based on 2010 freight-and-passenger data.
The EU decided in 2008 that international aviation should become a part of the world’s largest cap-and-trade program after airline discharges in Europe doubled over two decades.
US carriers including AMR Corp’s American Airlines and United Continental Holdings are challenging the carbon plan in court, arguing the EU exceeds its jurisdiction.
Deutsche Lufthansa, Europe’s second-biggest airline, said its shortfall of EU carbon permits will cost €150m to €350m in 2012, according to an emailed statement from Peter Schneckenleitner, a company spokesman. That’s based on a shortfall of at least 30 percent and a carbon price as low as €15 a metric ton and as high as €35, he said. The airline’s cap of carbon allowances was set according to data from the three years through 2006 and the airline has grown since then, he said.
“Lufthansa will only pass on the real costs caused by the EU emissions trading system,” Schneckenleitner said by phone and email.
“Due to the tough competition situation there is no chance to make any windfall profits,” meaning the airline will only pass on the cost of paid-for allowances, he said.
“It is even questionable if we can pass on the real costs 1:1 to our passengers,” he said. “All in all, prices for tickets and the revenues to be realized are set by the market, and of course Lufthansa will do everything to receive the best possible revenues under consideration of the market circumstances.”
Abu Dhabi flag carrier Etihad said in August the scheme could cost it up to €500m ($719m) over the next eight years. James Hogan, CEO of the airline, said last week the aviation industry had become a “whipping boy” for environmental issues and said the move was a dressed-up means for EU governments to net revenues.
Emirates Airline, the largest international carrier, said in August the scheme could cost it up to $1bn.
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