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Myth of industry claims about crippling cost of EU ETS exposed: up to £1.1 billion windfall profit available to airlines in 2012 alone, study shows

Airlines could have made over a billion pounds in windfall profits in 2012 alone through the EU ETS, following its one year suspension for all but intra-EU flights, a report by the independent consultancy CE Delft has found. In the past many airlines have complained that EU ETS could impose crippling costs on the industry.

With the inclusion of aviation in the EU ETS, all airlines were required to surrender sufficient allowances (permits to pollute) to cover all their CO2 emissions in 2012, with the majority of CO2 permits being the cap given to air carriers for free. The remaining 15%, plus allowances to cover any emissions resulting from growth, needed to be purchased through auctions or the carbon markets – with these costs potentially being recovered by airlines through higher airfares throughout 2012.

Evidence suggests that airlines have not only been raising ticket prices to fund the permits they need to buy, but also passing on much of the notional cost of the 85% of allowances they received for free to customers, resulting in a boost to airline profits.

In addition, airlines will also be benefitting from last November’s ‘stopping the clock’ proposal from the European Commission, the report found. This delays inclusion of flights to and from Europe in the ETS from 2012 to 2013 to give the International Civil Aviation Organisation (ICAO) more time for the development of a global solution to aviation emissions. As airlines have raised revenues for 2012 to cover allowances  that they no longer need to surrender, this has further increased the windfall profits available to the industry.

The total benefit to airlines could be as much as €1.3 billion (£1.1 billion) in 2012 alone, the report found.

T&E, the Brussels-based NGO which commissioned the study. has called for these revenues to instead be channelled into UN’s Green Climate Fund, created to support developing countries’ initiatives to tackle the impacts of climate change.

The T&E  press release, with a quote from AEF Director Tim Johnson and a link to the full report is here.

A copy of the report is also available to download here.