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Europe says all airlines to trade emissions in 2012 - extended

European and international carriers including EasyJet Plc, British Airways Plc and American Airlines would be required to curb emissions under new rules proposed by European regulators to combat global warming.

Airlines flying within Europe, including EasyJet Plc, British Airways Plc and American Airlines, would be subject to the new regulations, which may result in higher fares, starting in 2011, the European Commission said yesterday. Flights between Europe and other continents would be included in 2012. The US attacked the plan as a violation of international aviation accords. The EU's plan for a trading system for carbon-dioxide credits can't be imposed „without the consent of non-EU participants,” the US mission to the EU said in a statement.
„All the major airlines have wanted this because it's fairer than an increase in passenger duty,” Chris Avery, an aviation analyst at JP Morgan in London, said. „Because this is five years away, I don't see it as price-sensitive for airline shares.” Lawmakers worldwide are drawing up laws to reduce the pollution linked to global warming. Emissions trading allows an airline that curbs its output to sell spare allowances to other carriers.
Permits setting emission levels would be auctioned by member states or issued for free. Airlines would get a £2.7 billion (€3.97 billion) windfall if the permits were free, the UK's Institute for Public Policy Research said this week. The number of permits given to airlines will be determined by the average level of emissions in 2004-2006, according to the European Commission. The system would curb emissions by 183 million metric tons a year, or 46%, by 2020, it said.

The Air Transport Association, a Washington trade group for major US carriers, said it was disappointed in the EU plan. „This misguided decision clearly violates international laws and bilateral air service agreements,” the group said in a statement. The US mission said „many other countries” had also raised „strong objections” to the commission's approach. The approach will be „unworkable,” the US said.
Assuming airlines pass on the emissions-trading costs in full to passengers, by 2020 the price of a typical flight within the EU could rise by between €1.80 ($2.37) and €9, the commission said. Because 2004-2006 are the base years capping allocation of permits, demand for carbon credits from airlines will likely rise as that industry grows through 2011, when the new rules start, an analyst said.

„Aviation without doubt will increase demand for allowances” in the five years through 2012, Guy Turner, director of New Carbon Finance, a London-based consultancy and research firm, said yesterday by telephone. „It's surprising the market hasn't reacted.” EU permits for December 2008, trading in a market established last year for power plants and industrial factories, were unchanged at €17.10 a metric ton on the European Climate Exchange at 6:21 p.m. yesterday Amsterdam time.
Europe doesn't expect legal challenges to the emissions trading proposal, Environment Commissioner Stavros Dimas told reporters yesterday in Brussels. Europe will give US and other non-European carriers „time to engage in the process,” he said. „We shall try to persuade the others.” The commission, the regulatory arm of the EU, examined whether emissions trading laws would prompt airlines to bypass Europe, Dimas said.

„Dubai looks more tempting as a hub on a flight map than when you actually look at the globe,” he said. „Using Dubai as a hub would often mean flight plans would be in the shape of a triangle.” „I don't think there is going to be an impact for Middle East travel, most of which is transfer,” Richard Pinkman, analyst with the Center for Asia Pacific Aviation in Singapore, said yesterday by telephone. Dimas said lawmakers needed to act quickly to keep global emissions at 2005 levels, reducing the risk of climate change.
The proposal needs the approval of the EU's national governments and of the EU Parliament. „Emission-rights trading mustn't put European airlines at a disadvantage,” German Transport Minister Wolfgang Tiefensee said yesterday in a faxed statement. „An isolated application for Europe only is highly problematic,” said the minister. The first phase of the current EU emissions trading system for utilities and factories runs until 2007, followed by a five-year second phase. The EU system is the world's largest.

„We are satisfied with the commission's proposal, although in environmental terms and from a competitive perspective it would be preferable to have a global scheme,” said Niels Eirik Nertun, environmental director at SAS Group. SAS Group's subsidiary Scandinavian Airlines is the Nordic region's largest carrier. Europe wanted to lead in the creation of a global emissions trading system, Dimas said. „The directive we are proposing yesterday is good for the environment, good for business and good for travelers.” The EU was considering whether to auction permits rather than give them away starting 2013, to reduce windfall profits to emitters, Dimas said. Bulgaria and Romania join the EU on January 1, expanding the world's biggest trade block to 27 nations and to the Black Sea. The commission's aviation restrictions do not apply for Romania. (Bloomberg)