EU’s CO2 Emissions Trading Scheme Set to Raise Airfares by 5.2 Percent

The European Union’s Emissions Trading Scheme for aviation could increase passenger fares by roughly 5.2 percent on key long-haul routes, according to OAG, the aviation intelligence firm.

Under that new scheme, airlines flying within Europe now have to pay for their carbon emissions. The ETS covers 30 countries, including the 27 EU member states as well as Iceland, Liechtenstein and Norway.

OAG analysis of the ETS calculation process indicates that the knock-on effect of this estimated 3.5 billion euro cost to the aviation sector could increase passenger fares by up to 5.2 percent on key long-haul routes. Including aviation in the ETS, which initially was applied only to on-the-ground industry and utilities, is controversial and not just with airlines.

In October, the U.S. House of Representatives passed a bill prohibiting U.S. airlines to participate in the EU scheme. “There are only two scenarios for airlines from 2012 -- to pay ETS charges or to use non-EU points to stop-off to pay less,” said John Grant, executive vice president, UBM Aviation. “This not only has significant ramifications for airlines' operating costs, it also carries the very real threat of slowing, or in extreme cases eradicating, airport network driven economic growth within the EU.”