EU Emissions Tax Blows Change into Middle East Airways

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Time to scale down on Diamond Class sleeping suits? Image via Etihad

United Arab Emirates-based airlines, Emirates and Etihad Airways warn of higher ticket prices as they seek to pass on costs of a European Union (EU) aviation carbon trading scheme to passengers. Dubai’s Emirates will spend almost $52 million US this year to purchase additional emission allowances, with Etihad facing a $394 million bill over the next nine years, according to the head of environment of that Abu Dhabi-based carrier.

International airlines lost a battle against expansion of the EU carbon cap-and-trade system when Europe’s highest court backed the EU airline carbon tax known as the Emissions Trading System (ETS).

The ruling came after American and Chinese airlines challenged extension of the world’s largest cap-and-trade program beyond European borders. EU Climate Commissioner Connie Hedegaard has used the carbon trading scheme as one of her “main weapons to combat climate change,” and welcomed the decision. Meanwhile, US, China and India threaten to boycott the scheme.

An Etihad spokesperson said: “Etihad Airways remains opposed to this scheme. We consider it to be more an anti-competitive tax on non-European airlines than an attempt to promote environmentally sustainable practice by the aviation industry.”

So what’s this all mean for passengers?

It means that as of January all airlines flying to and from airports in the 27 EU states must purchase permits to offset carbon emissions on flights to and from Europe. The move pushes airlines to decrease carbon output, but will likely increase airfares.

Absent a global agreement, the EU maintains that ETS is the fairest way to tackle aviation’s contribution to climate change.

Climate action spokesman Isaac Valero-Ladron said critics from non-member states could circumvent the ETS by introducing their own alternative schemes. “Our law gives all countries the choice to reduce aviation’s carbon pollution differently. If they take equivalent measures, all incoming flights from these countries can be exempt,” he said. “Instead, some countries are basically saying: ‘We don’t like your approach, but we aren’t going to do anything to reduce emissions.’ Hopefully, these countries will quickly shift their attention to the need to take bold action at home.”

Global aviation trade body the International Air Transport Association (IATA) estimates the ruling will cost airlines $1.17 billion this year, inflating to $3.5 billion by 2020. The European Commission translates this to an airfare increase in the range of two to 12 euros per passenger: predicting a gradual impact on airlines as 85 percent of this year’s carbon allowances will be distributed free of charge. Bills become due in 2013 after annual emissions are calculated.

According to IATA, aviation has made global commitments to improve fuel efficiency by 1.5 per cent annually to 2020, to cap net emissions from 2020 and to cut net emissions in half by 2050 (compared to 2005 levels).

There is speculation that this may mean a boost to smaller Middle East airports such as Morocco and Cairo as flights to Europe from the USA, China and India seek interim connection hubs; carbon tax only being calculated on the shorter leg of the flight. Other Middle Eastern carriers such as El Al, Royal Jordanian, Kuwait Airlines, and Gulf Air have not commented on this development.

Middle East Airlines EU Carbon Tax Blows Change into Air

United Arab Emirates-based airlines, Emirates and Etihad Airways warn of higher ticket prices as they seek to pass on costs of a European Union (EU) aviation carbon trading scheme to passengers. Dubai’s Emirates will spend almost $52 MIL this year to purchase additional emission allowances, with Etihad facing a $394 MIL bill over the next nine years, according to the head of environment of that Abu Dhabi-based carrier.

International airlines lost a battle against expansion of the EU carbon cap-and-trade system when Europe’s highest court backed the EU airline carbon tax known as the Emissions Trading System (ETS). The ruling came after American and Chinese airlines challenged extension of the world’s largest cap-and-trade program beyond European borders. EU Climate Commissioner Connie Hedegaard has used the carbon trading scheme as one of her “main weapons to combat climate change,” and welcomed the decision. Meanwhile, US, China and India threaten to boycott the scheme.

An Etihad spokesperson said: “Etihad Airways remains opposed to this scheme. We consider it to be more an anti-competitive tax on non-European airlines than an attempt to promote environmentally sustainable practice by the aviation industry.”

Airfares could fly into the sky

It means that as of January all airlines flying to and from airports in the 27 EU states must purchase permits to offset carbon emissions on flights to and from Europe. The move pushes airlines to decrease carbon output, but will likely increase airfares.

Absent a global agreement, the EU maintains that ETS is the fairest way to tackle aviation’s contribution to climate change. Climate action spokesman Isaac Valero-Ladron said critics from non-member states could circumvent the ETS by introducing their own alternative schemes. “Our law gives all countries the choice to reduce aviation’s carbon pollution differently. If they take equivalent measures, all incoming flights from these countries can be exempt,” he said. “Instead, some countries are basically saying: ‘We don’t like your approach, but we aren’t going to do anything to reduce emissions.’ Hopefully, these countries will quickly shift their attention to the need to take bold action at home.”
Global aviation trade body the International Air Transport Association (IATA) estimates the ruling will cost airlines $1.17 billion this year, inflating to $3.5 billion by 2020. The European Commission translates this to an airfare increase in the range of two to 12 euros per passenger: predicting a gradual impact on airlines as 85 percent of this year’s carbon allowances will be distributed free of charge. Bills become due in 2013 after annual emissions are calculated.

According to IATA, aviation has made global commitments to improve fuel efficiency by 1.5 per cent annually to 2020, to cap net emissions from 2020 and to cut net emissions in half by 2050 (compared to 2005 levels).

There is speculation that this may mean a boost to smaller Middle East airports such as Morocco and Cairo as flights to Europe from the USA, China and India seek interim connection hubs; carbon tax only being calculated on the shorter leg of the flight. Other Middle Eastern carriers such as El Al, Royal Jordanian, Kuwait Airlines, and Gulf Air have not commented on this development.

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