September 9, 2011 / 3:52 PM / 8 years ago

Most airlines to get 60-70 pct of CO2 needs for free-Pt Carbon

LONDON (Reuters) - Most airlines will need to buy 30-40 percent of their carbon permit needs from the wholesale market when the aviation sector joins the EU emissions trading scheme next year, according to an official at German national carrier Lufthansa (LHAG.DE).

An aircraft flies over a wind turbine at East Midlands Airport, central England May 10, 2011. REUTERS/Darren Staples

Surging passenger numbers and a large increase in airfreight since 2004 will leave many operators needing to buy far more than 15 per cent of their historical emissions, according to Stefan Mast, head of ETS implementation at Lufthansa Group.

This is despite having a free allocation of 85 per cent of historical emissions.

“The whole aviation sector faces a strong under-allocation of certificates, due to the fact that all growth since the baseline years 2003-2004 has to be fully purchased,” Mast wrote in an opinion piece in today’s edition of Carbon Market Europe.

“When taking this into account, the official figure of 85 percent free allocation is misleading, as, in fact, most airlines will have to buy between 30 and 40 percent of their emission exposures. In Lufthansa’s case, this will equate up to 350 million euros.”

Mast said the burden of complying with EU rules, set to take effect on January 1 2012, had cost the airline 4 million euros, as it needed to integrate new IT systems and processes across the 17 airlines the company owns in seven different countries.

Around 4,000 operators will from next year be regulated by the EU emissions trading scheme, the bloc’s main weapon against climate change.

But with just a few months to go until the rules kick in, the EU is fighting a legal case taken by the U.S. while simultaneously trying to avoid sparking a possible trade war with China.

Next month the European Court of Justice will give its verdict on whether the EU acted illegally when it decided to unilaterally regulate the emissions from all airlines touching down or taking off within the 27 member state bloc.

But other nations, such as China and India, have been using diplomatic channels to pressure the EU into granting exemptions to their airlines.

Lufthansa, which is active in both the spot and futures European carbon markets and buys CO2 permits up to two years in advance, said, while it has complied with the bureaucratic and unreasonable regulations, it still supports a global solution that all countries agree to.

To read the full commentary visit - here

Reporting by Andrew Allan

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