EU gives airlines 85 percent free CO2 permits in 2012

BRUSSELS (Reuters) - Airlines will receive 85 percent of their required carbon emission permits for free in 2012 -- the first year the sector is included in the EU's emissions trading system (ETS) -- the bloc's executive said.

The share of free allowances given to airlines will then fall to 82 percent in the third ETS trading period from 2013-2020, the European Commission said in a statement on Monday.

"At current market prices these free allowances represent more that 20 billion euros over the decade. With these potential revenues, airlines could invest in modernizing their fleets, improving fuel efficiency and using non-fossil aviation fuel," it said.

From January 1 2012, about 4,000 airline operators will face emission limits on all flights into or out of the 27-nation bloc -- regardless of nationality or operator -- and must submit emission permits for each metric ton of carbon dioxide released.

The emissions cap of 212.9 million metric tons of CO2 in 2012 equates to 97 percent of the sector's average annual emissions from 2004 to 2006. It will tighten to 95 percent, or 208.5 million metric tons, from 2013 through 2020.

Airlines' free allocation differs widely, depending on the carrier, according to a Point Carbon report last week, which said scheduled airlines will receive between 20 and 100 percent of their 2012 permit requirement free.

(Reporting by Charlie Dunmore, editing by Rex Merrifield)