LONDON Jan 12 Several big airlines are
taking advantage of European carbon law by snapping up emission
allowances at bargain prices, tuning out an outcry against the
scheme by many non-EU airlines and shoring up demand in a market
that saw prices cut in half last year.
All airlines using EU airports were brought into the
European Union's Emissions Trading System (ETS) on Jan. 1,
joining more than 10,000 power and industrial plants which have
been active in the scheme since 2005.
Under the EU scheme, all airlines landing or taking off in
the 27-nation bloc and three neighbouring countries must submit
permits to cover the carbon emissions of these flights.
"We are continuously buying allowances," Peter
Schneckenleitner, a spokesman for Deutsche Lufthansa AG,
Germany's biggest airline, told Reuters.
Lufthansa has said it would need to buy 35 percent of the
permits it needs this year on the open carbon market, while it
would pass on to its customers an expected 130 million euros
($166.11 million) of the carbon cost.
Some airlines and industry groups, particularly from non-EU
countries such as China, India and the United States, continue
to rage against the ETS, despite the EU's highest court in
December ruling the scheme does not breach international law.
Carbon trading for airlines has been slow since they have
yet to receive their emissions permits. Yet major airlines
Deutsche Lufthansa AG, Air France-KLM and
others have been buying or plan to buy carbon permits.
For some airlines the timing to buy could not be better, as
benchmark EU Allowances are struggling to rebound from
a record low of 6.30 euros a tonne hit in mid-December. They
have since recovered to around 7 euros a tonne - still half of
their value at the end of 2010.
Exchanges are also taking notice. Slovakia's Commodity
Exchange Bratislava on Wednesday said it will launch trade in EU
aviation allowances (EUAAs) before the end of February, the
first to announce an offering of the permits.
Carbon trading eventually will become as routine for
airlines as hedging fuels and currencies, although volumes will
vary depending on economic forecasts, said the chief executive
of Virgin Atlantic.
"At the moment it's being driven by the level of confidence
and the level of economic activity in Europe, which is
struggling to grow," CEO Steve Ridgway told Reuters TV.
In the UK, Virgin will receive nearly 3.6 million EU
aviation allowances this year, and a total of 27 million for the
period 2013-2020, UK data shows. Virgin's 2010 carbon emissions
at 4.5 million tonnes mean it will likely need to buy more.
The EU aviation emissions cap for 2012 has been set at 215
million tonnes, while 183 million EU Aviation Allowances, or 85
percent of the total, will be given for free to airlines -
expected in late February. The rest will be sold via auctions.
The aviation sector's net demand for carbon permits could
reach up to 700 million by 2020, say analysts at Thomson Reuters
Point Carbon, making the aviation sector the second biggest
buyer of carbon units behind the electricity sector.
This demand could be a relief to the ETS market, which has
seen demand crippled by an over-supply of carbon units and
concerns about a double-dip recession.
Air France-KLM plans to buy emission permits throughout the
year, said a company spokesman, estimating its ETS compliance
costs of between 50 million to 100 million euros in 2012.
The group will have to buy around 7 million carbon units
this year, said Cedric Leurquin, a spokesman with Air France in
Paris. "The exact amount will depend on changes in activity."
UK data for major airlines British Airways and
low-cost carrier easyjet show their CO2 emissions in
2010 were 4.6 million tonnes and 700,000 tonnes above their 2012
Many airlines plan or have started to pass on their ETS
compliance costs this year to consumers, potentially earning
them windfall profits.
But even if customers shoulder the compliance costs, not all
European airlines see any value in the carbon scheme.
"We do not agree with it and we do not believe there will be
any environmental benefit," a spokesman for Ryanair,
Europe's largest budget airline, told Reuters earlier this week.