EU starts Carbon Emissions Trading Scheme – UK APD tax increased

European Union Starts CO2 Emissions Trading Scheme - ETS | Aviation News

EU Begins Controversial CO2 Emissions Trading Scheme

The European Union has rung in the new year with the requirement all flights to, from, and within Europe hold mandatory emission rights in the form of CO2 certificates.  The European Union is providing 82 per cent of the necessary CO2 certificates free of charge, leaving air carriers to purchase another 15 per cent of the certificates and the last 3 per cent of certificates being reserved for new carriers.

Air carriers around the world are seeing red as a result of the European Union’s CO2 Emissions Trading Scheme.  Many foreign carriers believe they should not be required to pay this, some have even gone as far as citing the scheme is based on junk science.  Some carriers have shown public support, but most airlines believe now is not the time to implement such a scheme. The weak US economy combined with Eurozone financial instability concerns commercial air carriers which operate to Europe from around the world.  The bottom line for many is increased costs with thin profit margins as a result of the volatile oil market and high jet fuel costs.

The European Union has suggested carriers pass CO2 emissions costs directly onto consumers. Climate Change or Not this will hurt Europe’s economy, along with European trading partners.

The certificates being provided are based on average emissions for the years of 2004 to 2006.  Lufthansa Group is concerned it’ll have to buy at least 35 per cent of the certificates it needs because of growth in recent years.  Based on certificate prices, Lufthansa expects to incur an additional expense of $150 million dollars in 2012. 

Lufthansa Concerned About Increased ETS Cost

At this point, Lufthansa plans to include the cost of purchasing CO2 certificates into its existing fuel surcharge at the beginning of 2012.  Lufthansa last raised its fuel surcharge for European and long-haul flights on December 15, 2011, by $5 to $15.  While they have no immediate plans to increase the surcharge, in the future this surcharge will reflect the cost of oil and the expense of acquiring CO2 emissions rights.

Carsten Spohr, Member of the Executive Board of Deutsche Lufthansa AG, said, “Climate change is a global challenge. This means we also need a global solution. The incorporation of airlines in the EU Emissions Trading Scheme means that European operators are now facing additional costs which will make flying within and via Europe more expensive for passengers. It will also distort competition and impact on the sustainability of the aviation industry if it proves impossible to implement with the competitive neutrality promised by policy makers. However, given the huge resistance at an international level, it is unclear how the situation will develop.”

The resistance at the international level could potentially result in some changes, but if the scheme is kept in place, the costs of long-haul travel to/from Europe is certain to rise.  Flights to the United Kingdom face a double whammy with an increased APD, which is the highest aviation tax in the world.

While the British Airport Departure Tax, or APD, is not a green tax, it has been sold as such a tax in the past as it impacts travelers based on the distance of their trip.  In December when further rises in the APD were confirmed, British Airways spoke out.

Not only is it the highest aviation tax in the world, but with a difficult economy, British Airways announced they’ve had to postpone their plans to bring an extra Boeing 747 into service next summer and review the use of two others.  The carrier had been planning to create at least 800 new jobs in 2012 to support growth, but is now unsure.

The increased UK APD will have consequences for their flight operations, in particular for the long-haul leisure routes which carry cost sensitive customers. Passengers who frequently fly to and from the UK are also seeing red as the ADP continues to increase each year.

British Airways views the APD as a tax on doing business with Britain – a tax on jobs in the airlines, airports, UK tourism and leisure, as well as supplier industries.  Transport links are vital to success in a global economy.

Keith Williams, British Airways’ chief executive, said, “The Government talks about creating the conditions for jobs and growth – but the reality is the opposite. Its tax policy, which is uniquely hostile to aviation, is costing jobs and growth at British Airways.”

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