Tuesday, January 03, 2012

Carbon tax raises Europe travel costs. Airlines to pass on additional burden of the emissions trading scheme to passengers

Frankfurt airport is a hub for European operations of many airlines. The emissions tax that came into effect yesterday will set global airlines back by about $1 billion every year, according to some estimates.

Dubai: It was not a happy beginning to the year for the global airline industry as the European Union imposed carbon taxes on airlines across the world from January 1.

The move will directly result in an increase in ticket prices and add an extra $1 billion to airlines' costs globally on current allowance prices for carriers flying in and out of Europe.

Under the emissions trading scheme (ETS), all airlines now flying to or from Europe are obliged to obtain permits to cover their carbon emissions and to use European airspace.

"Initially, it would perhaps add a couple of per cent to ticket prices — it's not a huge increase to travel costs, but the risk is that it could increase," Brian Pearce, Chief Economist at the global aviation body the International Air Transport Association, told Gulf News.

"The costs could quadruple if we see allowance prices rising to levels they were several years ago," said Pearce.

Asked how much of the cost Emirates plans to pass on to its passengers, the Dubai carrier's president Tim Clark said: "Unfortunately, while we always try to make our fares as competitive as possible, the additional costs of the EU Emissions Trading System programme will almost certainly have to be passed on to customers, but how this will be done has not yet been determined."

He added that Emirates estimates that in 2012 alone, it will cost the airline over €40 million to purchase additional emissions allowances to comply with the scheme, and well over half-a-billion euros in the nine-year period to 2020.

Etihad Airways, too, will end up bearing an extra cost of €310 million over the next nine years, according to Linden Coppell, the Abu Dhabi-based carrier's Head of Environment.

"It is inevitable that such a cost would have an impact on fare levels. This is why we want to ensure we have a fair global system," he said.

Meanwhile, Deutsche Lufthansa reportedly said yesterday that it will pass on to its customers an expected €130 million of costs for carbon permits it needs this year under the EU emissions trading scheme.

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