Airlines may profit from carbon trade

By Rowena MasonPublished: 9:06PM GMT 04 Dec 2009
Airlines could almost double their profits on the back of carbon trading if they succeed in passing on the full price of emissions permits to their customers, according to the Carbon Trust.
The organisation highlighted a huge variation in predicted airline profitability after emissions trading is introduced in Europe from 2012. It estimates that the worst-performing airline will see up to 80pc lower profits than the best-performing airline as a result of the system.
In total, passengers flying to and from Europe will pay an extra €23bn (£21bn) to €35bn on the price of their tickets between 2012 and 2020 based on an estimated carbon unit price of €25, its new report will say next week.
This would compensate the aviation companies for the amount of permits they will have to buy if the heavy emitters do not switch to greener fuels.
However, the sector is given 82pc of its permits for free - and could see huge windfall profits if it adds the value of these free allowances on to ticket prices.
The Carbon Trust also calculated that the cost of jet fuel price is likely to rise 15pc if there is a carbon price of €25. It warned jet fuel prices could rise by four times this amount if other harmful gases emitted by the industry are at some point included in the trading system.
The Carbon Trust will publish its full findings ahead of the key Kennedy report on aviation next week, led by the Government's Committee on Climate Change.
David Kennedy, who leads the committee, is likely to outline draconian new controls in the UK that could involve more taxes on the sector or limits on flights and airports.
Last week, British Airways, Virgin Atlantic, BAA, BAE Systems, Airbus UK and Rolls-Royce all signed up to a new industry-led Sustainable Aviation Manifesto ahead of the report, which they fear could damage the industry. It calls for a global framework for emissions, needed to stop the "differential impact" of nationally-imposed targets that would harm the UK.
Next week world leaders and businesses meet in Copenhagen for the world summit on the environment, where aviation emissions will be a key part of the debate.
The industry has pledged to return emissions to 2000 levels by 2050.