Europe's Emissions Trading System Raises Airfares

Flights to and from Europe seem poised to get a bit steeper this year: Europe’s Emissions Trading System (ETS) extended to the aviation industry last week, requiring all airline carriers landing in the 27-nation European Union to monitor their carbon emissions.

According to the BBC, each airline is allowed a specified amount of CO2 emissions. If the airline emits more than that amount, it must purchase carbon allowances. If it emits less than its limit, it can sell its extra allowances to other heavy carbon emitters, such as other airlines, steel makers, refineries or power plants.

But, the story continues, airlines in Europe and around the world are "squawking about the measure," saying that the scheme will increase costs, which they will pass along to their customers by raising fares.

U.S. carriers increased fares for European flights last week to cover the initial costs of compliance. (Delta, for example, raised their fees by $6.) Although British Airways has not raised fares yet, a spokesperson said that the company would be keeping an eye on the cost of compliance. Lufthansa has warned that it might increase its fares as well. According to the the Associated Press, Lufthansa said it would have to buy at least 35 percent of the certificates it needs based on past emissions and recent growth. It put the cost at $168 million in 2012. The German airline said that it will pass the cost to customers by raising current fuel surcharges, but it didn’t estimate the per-passenger increase.

Bloomberg is reporting that the inclusion of airlines in the European Union’s carbon plan will cost the industry $4.5 billion and may increase ticket prices by an average of 3 percent, aviation information provider OAG said.

Importantly for US travelers, the New York Times is reporting that the House of Representatives has already approved a bill that would bar American air carriers from participating in the system. A similar bill has been introduced in the Senate.


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