By Shane McGinley
Planned emissions tax met with dismay by US airlines that have branded it ‘illegal’
A new European Union tax aimed at capping airlines’ carbon emissions could cost Etihad Airways up to €500m ($719m) over the next eight years, the Abu Dhabi flag carrier said.
Beginning in 2012, airlines landing within the EU will have their carbon dioxide emissions capped at 97 percent of their average 2004-06 levels and 95 percent in 2013 – a ruling that could cost fast-growing Gulf carriers billions of dollars.
Airlines will face fines of up to €100 for every tonne of carbon dioxide they emit above the limit, in a bid to cut pollution by five percent through 2020.
Carriers that don’t use all their emissions allowance can sell the excess on to other airlines.
Linden Coppell, Etihad Airways’ head of environment, said the cost of complying with the Emissions Trading Scheme (ETS) could reach €500m by 2020, based on “potential carbon prices as high as €60 per tonne”.
“These estimates are based on a number of dynamic factors including estimates as to the number of free allowances that will be granted to Etihad… our growth into Europe over the next 10 years; the ability of the industry to reduce emissions growth… and the cost of carbon,” he said.
The ruling has been met with dismay by US airlines, who estimate the law could cost them $3bn through to 2020. The Air Transport Association of America, the nation’s largest airline body, has branded the scheme illegal and said it will hurt industry growth if allowed to go ahead as planned.
“[The scheme] violates international law, including the sovereignty of the United States and imposes an illegal, exorbitant and counterproductive tax,” vice president of environmental affairs Nancy Young said in a statement.
The Gulf’s largest airlines – Etihad, Emirates and Qatar Airways – have rolled out ambitious expansion plans that include the ramping up capacity on their European routes.
Emirates Airline, the world’s largest carrier by international traffic, said it supported “ambitious’ emission reduction targets and said it was investing in fuel-efficient aircraft to help meet caps.
The Dubai carrier plans to increase its fleet to eventually include 120 Airbus A380s, a model that produces 75g of CO2 per passenger kilometer; almost half of the European target for cars manufactured in 2008.
Toby Stokes, Middle East aviation sector leader at Ernst & Young, said the taxes would prove an additional burden on airlines’ balance sheets, already squeezed by high oil prices and increased competition.
“The emissions challenge that the aviation industry faces is only getting tougher, with the introduction of the ETS for airlines as well as other green taxes being imposed on carriers landing in other countries, including Germany and Austria,” he said.
“The green agenda is a particularly tough issue for the industry. While airlines are experimenting with more environmentally friendly fuels, I think it will still be sometime yet before the majority of commercial flights are on a plane powered by nut oil and seaweed.”