It was no surprise to the airline industry when the world’s first global carbon pricing began this month, with the EU’s imposition of a carbon cost on all fights that land in or take off from Europe. All airlines have known since 2008, when the EU announced the new rule, that in January 2012 they would have to join the EU cap and trade program if they emitted over 10,000 tons of CO2 a year. (Small aircraft were excluded.)
Under the “cap” part of the EU cap and trade program, the European Trading Scheme (ETS), all affected flights must reduce their emissions to 97 percent of a baseline of the emissions from 2004 to 2006, in the first year. That ratchets down each following year. (This is exactly why we’ve seen so many stories about the surge in interest from airlines in aviation biofuels like “Lufthansa To Lift Off With Biofuels” and “United Airlines Makes Successful Flight Using Synthetic Jet Fuel.”)
During the phase-in period there is a free allocation of 85 percent of the permits for this year; so the fee will be lower for the first year. Each year, the cap will be reduced, raising more funds, as a carbon emissions fee on every ton of CO2 emitted.
Standard & Poor’s calculated, “As of Jan. 21, 2011, the weekly average jet fuel price was about $890 per metric ton. With 1 tonne of jet fuel generating 3.15 tonnes of CO2 and a current carbon price of about 15 euros per tonne of carbon dioxide, we calculate that the additional carbon cost would be the equivalent of adding about 47 euros (about $64), or about 7 percent, to the cost of a tonne of jet fuel.” (Currently the ETS carbon price is about half that. The carbon price varies, depending on demand.)