"Airline lobbyists warn that EU emissions plan would devastate profit"

Wednesday, November 29, 2006

Airline lobbyists warn that EU emissions plan would devastate profit 
By James Kanter
The International Herald Tribune


BRUSSELS - Raising the stakes in a landmark battle over tackling climate 
change, the airline industry's main lobbying group said Tuesday that plans by 
the European Union to cap aircraft emissions would cancel out the profits of 
European carriers, and it sought to move the debate to the United Nations.

Giovanni Bisignani, the director general of the International Air Transport 
Association, said the EU proposal would cost airlines around the world €3 
billion, or $4 billion, a year to buy emissions allowances and would be 
"devastating" to European competitiveness in the sector. "This is a shocking 
number for an industry that has done so much to repair itself in recent years," 
he said.

Most airlines and the U.S. government want the International Civil Aviation 
Organization, a UN agency, to draw up any rules for emissions trading so that 
all countries comply. Talks are set to begin at the organization in September 
next year. But a global agreement would probably take a long time to achieve, 
so Europeans are pushing with their own plans that would likely go into effect 
early in the next decade.

Barbara Helfferich, a spokeswoman for the EU environment commissioner, Stavros 
Dimas, did not comment on the air transport association's calculations. But she 
said an EU tally showed that passengers could pay up to €9 more for each 
round-trip ticket if airlines passed on the costs to consumers.

"The price tag to fight climate change and to offset pollution by airlines is 
reasonable," she said, adding, "This will not kill the airlines."

Foreign-based carriers serving high- traffic destinations like London, Paris 
and Frankfurt would be required to operate under the new rules. If other 
countries introduce similar measures, the EU will drop its jurisdiction over 
the return flight.

The plans mirror an existing carbon credit trading system that Europe uses to 
combat global warming and meet emissions targets under the Kyoto Protocol. 
Airlines are exempt from paying tax on their fuel, called kerosene, and EU 
officials say that gives them a cost advantage over all other forms of 
transportation.

Dimas is expected to propose a final draft of the legislation Dec. 20 to the 
European Commission. But heavy lobbying by the airline industry or a split 
among the 25 European commissioners could mean delays.

According to calculations by the air transport group, European carriers alone 
would face charges of about €1.8 billion each year, equal to their projected 
profits in 2006. Total costs of the plan to the industry could rise over the 
next decade as Europe increases the number of permits airlines must buy, and as 
airlines add flights. An economist at the group calculated the costs by 
estimating the amount of emissions the industry would produce in 2011 at a cost 
of €30 for each ton. The price of a ton of carbon is currently about €9.

Bisignani, the group's director, said the industry was already highly 
competitive on fares despite higher fuel costs, meaning that airlines would 
bear the brunt of costs.

But Richard Aboulafia, of the aviation consultancy Teal Group in Virginia, said 
airlines were likely to be able to pass some costs of emissions allowances to 
the traveling public.

He added, however, that "there's real danger here for the airlines of death by 
a thousand cuts" as carriers installed costly new safety equipment and pay for 
other environmental improvements.

In the meantime, the International Air Transport Association is pushing for the 
creation of a single European air traffic control organization, which it argues 
would improve coordination between airports and cut the amount of time that 
aircraft burn fuel during flights and in holding patterns.

Bisignani also said that orders for fuel-efficient jets showed that the 
industry was "going green" without the need for government intervention.

Air transport currently represents about 2 percent of global carbon dioxide 
emissions, and that figure should rise to about 3 percent by 2050. Cars 
represent a far larger problem, creating about 18 percent of carbon emissions 
worldwide. But the EU and environmentalists say that aircraft flying in the 
skies release more harmful pollutants than cars.

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