Airlines call for 'more sensible' carbon-cutting scheme[de] 

On 6 June, the aviation industry unveiled an independent impact-assessment of the inclusion of aviation into the ETS, which it claims demonstrates that the Commission's proposal "will jeopardise the long-term viability of the European aviation industry". 

According to the six associations that commissioned the study, the Commission's text is based on the three "unrealistic assumptions" that: 

• Airlines will be able to pass on 100% of the costs of entering the ETS to consumers; 
• demand for air travel is not price sensitive and will not result in a significant loss of passengers, and; 
• giving out some or all emissions for free would allow airlines to make windfall profits at consumers' expense by passing on non-existent costs to travellers. The Commission has therefore proposed that auctioning should be made mandatory. 

According to the Ernst & Young and York Aviation impact assessment however, these assumptions are not supported by economic theory. Rather, the study claims that the ability of airlines to pass costs onto their customers will vary according to the operator's business model and its exposure to competition. At most, states the study, airlines will be able to recover just one third of the costs. 

And these costs will be substantial – more than €45 billion from 2011 to 2022 (and up to 44% higher if auctioning is included) – double the cumulative profit of Europe’s airlines over the past decade. 

Moreover, as operating costs rise, profits will fall due to the fall in demand, which will occur once ticket prices rise, because demand for air travel is in fact highly price-sensitive, claims the study. 

The study also shows that, whatever the geographical scope of the scheme, it will put EU aircraft operators at a "perpetual competitive disadvantage vis-à-vis non-European carriers". 

Airlines are therefore calling on the Commission, Council and Parliament to review the proposal and make it less detrimental to the sector. They say that a different baseline and cap are essential. 

They further claim that the 2004-2006 baseline is too far removed from the trading period (2011-2022) and will leave 17 years of growth unaccounted for, forcing the industry to undertake massive credits investments even if, originally, credits are given away for free. 

Auctioning of emission allowances would simply aggravate this situation by making airlines pay for an even greater number of credits, they state. 

European Regions Airline Association (ERA) Director-General Mike Ambrose accused the Commission of "intellectual dishonesty", pointing out that those who write the policy should not be the same as those who analyse its impact. 

He said that the proposal, as it stands, is disproportionate because the Commission now says that airlines contribute just 1.5% of all world emissions, whereas lighting contributes 19%. "We are not expecting to get away for free," he said, adding: "We just want the Commission to make the scheme more sensible." 

"The current proposal goes completely against the Lisbon objectives for growth and jobs as it will make Europe less competitive and less well-connected both internally and internationally," he stressed. 

AirFrance's permanent representative in Brussels, Philippe Eydelaine, underlined that it is important not to confuse the message related to the impact assessment. "We are not criticising the strict content of the proposal. We agree that the ETS is the best avenue. We are simply saying we must work very seriously on the details." He said the impact assessment needed to be more neutral, adding: "It is not right to have always the same consultancies, using the same hypotheses. There are too many preconceived ideas." 

International Air Carrier Association (IACA) Director-General Sylviane Lust rejected the idea of mandatory auctioning, even for a minimal share of total allowances, saying: "If we have to by all our emissions from scratch, it will be impossible to survive." 

She stressed that airlines were not asking for "special treatment" compared with other industries in requesting the baseline and cap to be relaxed. "For airlines, the cap is set for the sector alone whereas, for other sectors, a national cap was set and individual industries had the possibility of negotiating their own contribution with their governments, according to their needs and their capacity to curb emissions," she explained. Many member states also made amends for the sector's growth and other corrective factors to make targets easier to reach, she said, adding: "Here, the cap is set at European level. There is no room for corrective factors or for economic growth. And yet, at the same time, we have higher abatement costs." 

Le Thi Mai, general manager of environment issues at the Association of European Airlines (AEA), commented that auctioning is still optional for member states and other industrial sectors. "So, why should it be mandatory for airlines?" she asked. 

Raising the issue of global co-operation, Le stressed that the loss in competitiveness of Europe's airlines due to the scheme would be bad enough without running the risk of being exposed to retaliatory measures from third countries concerning the legality of the scheme. She urged: "Please, EU, do not expose us to retaliation from third countries," saying that this would "surely kill the industry". 

Reinout Wijbenga of the European Cargo Alliance (ECA) agreed: "We need the EU to get guarantees from third countries that they will enter the scheme. Otherwise it should not enter into force…The EU must get its act together on the international stage." 

The Commission’s Head of Unit for clean air and transport Marianne Klingbeil however denied that airlines are being treated any more unfavourably than other sectors, pointing in particular to legislation currently under preparation to limit emissions from cars (see LinksDossier on cars&CO2) and ships (EurActiv 18/04/07). 

"There is no way you can say this is a special case," she said, adding: "Each transport industry thinks they are in the eye of some sort of climate change storm, but the steel industry, for example, is already in the ETS and it can’t negotiate anything. The more emissions coming from one sector, the more other sectors already under the ETS have to pay for it. Is this a fair deal?" 

And the European Federation for Transport and Environment (T&E) believes the current proposal is actually "too weak" and will only lead to emission reductions of 3% - less than one year's growth of the aviation sector's emissions. Jos Dings, director of T&E, added: "It is stunning that the aviation industry can talk about 'fairness' with a straight face. Not only does the industry stand to get double the permits of other sectors, the fuel tax exemption enjoyed by the sector is worth another €35 billion alone, not to mention the lack of VAT on tickets and the €20 billion European taxpayers have paid out in rescue aid to airlines."