EU’s plan to combat greenhouse gases could be costly for airline industry

The European Union’s (EU) plan to deal with greenhouse gas (GHG) emissions of the airline industry will go into force in 2012. Airlines have been targeted because though they only account for three percent of global GHG emissions, airline emissions have been growing faster than any other industry. Estimates for emissions from the airline industry show a 98% growth between 1990 and 2006. The airline industry will continue to grow due to air travel demand, affluence and economic expansion, and so will airline emissions. The United Nations Framework Convention on Climate Change estimates that by 2020, airline emissions will increase by 63% and 88% by 2050. Even the industry that represents the airlines, the International Air Transport Association (IATA) predicts that airline emissions will grow faster than technology to improve fuel efficiency. The EU’s plan will include a cap on airline emissions which will be measured in tons of CO2. Eighty two percent of the cap will be given as free emission allowances. Fifteen percent will be in the form of allowances that will be auctioned. New entrants will have the remaining three percent available to them. Standard and Poor’s (S&P) has looked at the impact of the EU plan for airline emissions and finds that the cost impact on airlines could be significant. (March 8, 2011)