Emirates eyes EU carbon tax of $1 billion over 10 years

DUBAI Mon Aug 8, 2011 7:54am EDT

Emirates cabin crew board an Emirates Airbus A380-800 at Manchester Airport in Manchester, northern England, September 1, 2010. REUTERS/Phil Noble

Emirates cabin crew board an Emirates Airbus A380-800 at Manchester Airport in Manchester, northern England, September 1, 2010.

Credit: Reuters/Phil Noble

DUBAI (Reuters) - Emirates, Dubai's flagship carrier, said the European Union's planned carbon emission scheme may cost it as much as $1 billion over 10 years, as it joined others airlines in objecting to the tax.

From January, airlines flying to or from Europe will have to buy permits from the EU's emissions trading scheme (ETS) for 15 percent of the carbon emissions produced during the entire flight.

"It (the scheme) will have a very significant impact on Emirates," Andrew Parker, Emirates' senior vice president for industry and environmental affairs, said at a conference in Dubai.

"It's safe to assume somewhere around $500 million to $1 billion range over the first decade of the scheme is likely," he said, when asked about how much ETS would cost the airline.

About a quarter of Emirates' global operations are in Europe, said Parker. All will be subject to ETS.

Airlines around the world have warned of a looming trade war due to the scheme, but the EU says it will not back down. The carriers say their emissions should only be tackled in United Nations bodies, such as the International Civil Aviation Organization (ICAO).

"We do not feel this scheme represents the best global approach to try and reduce aviation's impact," said Parker.

"Our single biggest concern is that there will be billions raised from the scheme but none of that will go back into research and development, environmental programs and projects that help aviation."

U.S. airlines stepped up their campaign against the EU's climate policy last month, challenging them in its highest court over the right to regulate their greenhouse gas emissions.

Last week the Arab Air Carriers Organization (AACO) asked Europe not to include the aviation sector in the ETS scheme.

Emirates, the Arab world's largest carrier, said it is fully compliant with the rules of the ETS but is watching closely the multiple lawsuits filed by other airlines against the EU.

(Reporting by Praveen Menon)

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Comments (3)
nivas37 wrote:
EU’s Carbon Emission Scheme is nothing but a ‘tax’ dressed pretty to make everyone believe they care about the environment. Simply put, the EU is not going to do anything but fund themselves with foreign airline’s money.

Aug 08, 2011 11:04am EDT  --  Report as abuse
NedalKatbeh wrote:
I strongly believe that any kind of actions to be taken w/r to climate change should be under the umbrella of UNFCCC. Developed countries – who we all agree that they are the main cause of CC – are punishing others who are not responsible for it (common but differentiated responsibility). Such actions taken by one side will severely impact the competitiveness of Developing Countries’ Airlines and eventually will exclude them from the market. This double impact on developing countries is completely unfair. (not the cause of the problem and suffering from it’s impact on their daily lives and excluded from the market).
Environmental Justice should be our concern in tackling such issues.
Nedal Katbeh

Aug 10, 2011 3:36am EDT  --  Report as abuse
IsaacValero wrote:
Dear editor,

I would like to make a few corrections to this article.

Firstly, the article states that the inclusion of aviation into the EU’s emissions trading system (EU ETS) is a tax. This is simply wrong. The EU ETS is a cap-and-trade system designed to keep emissions covered by the system within a pre-defined limit. Emission allowances are created corresponding to this pre-defined limit. At the end of each year, operators covered by the system have to account for their emissions and surrender allowances corresponding to their emissions. They can either use allowances they have been given for free or acquire allowances on the market. The objective is to allow the market to decide where reductions of emissions can be achieved in the most economically efficient way possible. For this reason it is called a “market based measure”.

The estimates of compliance costs for including aviation in the EU ETS quoted by Emirates are overstated. Under the EU ETS 85% of allowances will be allocated for free to airlines; only 15% will be auctioned. This system rewards airlines that reduce emissions at the expense of those that do not and so provides an economic incentive to reduce emissions.

However, the system provides airlines with the flexibility to be able to choose to implement emissions reductions themselves or pay others to do it by purchasing additional emission rights. If an airline decides the latter, it is widely expected that it will pass through in ticket prices at least the costs of buying additional allowances. The net cost for airlines should therefore be low. What’s more, airlines could even gain, if they also pass through some of the value of free allowances. Also, airlines with more modern and efficient fleets, such as those in the United Arab Emirates, will be at an advantage compared to airlines with older fleets. The additional costs to passengers are likely to be less than €2 each way on flight from Frankfurt to Dubai.

Under the legislation any revenues should be spent on tackling climate change. The EU Member States will be reporting to the European Commission on how revenues have been spent. Our intention is that these reports will be made public. In addition, the EU is investing €1.6 billion in the Clean Sky R&D programme to develop greener aviation technology, showing its full commitment to aviation research and development.

The EU, supports effective global action to reduce the climate impacts of aviation. However at present there is no consensus on global action to limit aviation emissions. The EU therefore took the lead by introducing measures to limit the carbon emissions from flights using EU airports by including aviation in the EU ETS. In addition, the EU continues to work actively towards a binding global agreement.

Yours sincerely,

Isaac Valero-Ladron
EU Spokesman for Climate Action

Aug 11, 2011 10:14am EDT  --  Report as abuse
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