A clear and fair incentive to pollute less, by Connie Hedegaard EU Commissioner for Climate Action
Despite many years of work and pressure from the EU, which has always supported and continues to support global action, states in ICAO have not been able to agree on a global approach to limit aviation emissions. This is why the European Union chose to go forward with legislation given the urgent need to address climate change. Emissions from international aviation in Europe have doubled since 1990 and may even triple by 2020, whilst most other sectors' emissions have decreased. As the EU has taken action in respect of most other sectors, it is only reasonable that aviation activities to and from the EU should also contribute to the fight against climate change.
With the inclusion of aviation in the EU Emissions Trading System, the fact is that 85% of aviation allowances will be allocated for free to aircraft operators covered by the system in 2012. In the period 2013-2020 this percentage of free allocation will reduce to 82%. The costs to passengers will then depend on whether the airlines pass through the value of the 85% of free allowances.
Depending on the airlines' decisions, costs can range between €2 and €12 a ticket each way on a transatlantic or other long-haul flight at current carbon prices.
As experience has shown in the past, in particular in the power sector, there could be a full pass through of the value of the allowances to costumers (high case scenario). Then the actual cost to passengers could rise to around €12. In this case, airlines could make an additional revenue per passenger carried of up to €10. This additional revenue could be used, for instance, to modernise the fleet, improve fuel efficiency and use non-fossil aviation fuels, which will help reduce emissions and thus not incur further costs to comply with the established cap.
If the company passes through only the cost of the additional allowances purchased (low case scenario), the actual cost to passengers should be below €2. In this case, there will be no net cost increases to airlines as any costs for purchasing the allowances that are not received for free will be passed over to the customers.
Let's take the example of a one-way flight from Paris to Beijing. The estimated CO2 emissions per passenger would be around 627 kg. The value of the allowances that need to be surrendered would be €7.52 per passenger at current carbon prices. Given the high level of free allocation of allowances to airlines, it is estimated that the cost for the airline in purchasing additional allowances to cover the emissions would be €1.50. If the airline decides to fully pass the €7.52 figure onto the passenger, this generates an additional €6.02 revenue for the company.
Obviously, airlines are in a position to decide the appropriate balance between the two ranges presented above.