AIRLINES will be forced to buy permits to cover all their carbon dioxide emissions under European proposals to address the growing contribution that flights make to global warming.
Ticket prices for return trips within the European Union will increase by between approximately £1 and £6, according to the option favoured in a report for the European Commission.
Aviation could join the European emissions trading scheme as soon as 2008, although British Airways believes that 2010 is more likely. The scheme would apply only to routes within the European Union.
Unlike other industries taking part in the scheme, aviation would not be given “grandfather” rights to cover its existing emissions.
CE Delft, the consultancy employed by the Commission to advise on the feasibility of aviation joining the scheme, said that it would be fairer to hold an auction in which CO2 permits were sold to the highest bidder. The study concluded: “Auctioning appears to be the most attractive option for allocation.”
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It found that grandfathering would penalise start-up airlines because, unlike long-established carriers such as BA, they would have no free allocation of permits to cover their historical emissions. Grandfathering would also give airlines no incentive to reduce their emissions before the start of the scheme.
BA condemned CE Delft’s proposal, saying that an auction system would be far more expensive and would produce no extra environmental benefit. Andrew Sentance, BA’s chief economist, said: “Auctioning would involve large sums of money being taken out of the aviation industry which would serve no environmental benefit. It would be damaging to the competitiveness of the European industry.”
CE Delft admitted that the system would reduce the growth in the market for flights in Europe by pushing up prices but it said that assuming that the price of a permit remained within a range of €10 to €30 per tonne of CO2, the impact on growth would be “relatively small”.
It said: “The main conclusion is that none of the policy options considered in this study will damage the competitive position of EU airlines relative to non-EU airlines.” However, the scheme could undermine the aggressive growth strategies of Europe’s budget airlines, especially Ryanair, which plans to double passenger numbers to 70 million by 2012. They would have to buy increasing numbers of permits each year.
BA supports the scheme largely because its passenger numbers have been declining for several years and are not expected to grow significantly The Commission is expected to issue a policy document next month based on CE Delft’s recommendations.
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Britain has made the inclusion of aviation in the emissions trading scheme a priority for its presidency of the European Union, which starts on Friday.
Mr Sentance welcomed CE Delft’s proposal that the scheme should not take account of the extra damage that greenhouse gas emissions do when emitted at cruising altitude. The report came as British Airways shares lost 15p to 260.75p amid fears that the increase in fuel surcharge would damage demand.