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Experts predict airline tickets to rise with new emissions trading scheme

January 4, 2012, 05:59 pm

The European Union recently passed a measure requiring all airlines to hold emission rights in CO2 certificates for flights to and from EU states. The allocation of the certificates will be based on the average emission reported between 2004 and 2006, and the Lufthansa Group expects the new requirements will force airlines to increase their ticket prices.

According to 4-Traders, Lufthansa will include the cost of purchasing the certificates in its fuel surcharge in 2012, in an effort to pass on the cost of the certificates. Lufthansa has yet to increase its fuel surcharge, after raising it in mid-December. In the future, the surcharge will reflect the price of oil and the cost of purchasing emission rights.

Experts predict Lufthansa, along with other European network rivals such as British Airways and Air France, will be most affected by the emissions trading scheme, Reuters reported. To combat the associated costs of the measure, Lufthansa will likely raise its ticket prices. In addition, the debt crisis in Europe will also make it difficult for airlines to burden the added costs without increasing ticket prices for passengers.

Carsten Spohr, member of the Executive board of Deutsche Lufthansa AG, told 4-Traders that the new EU measure is demanding a global change to aviation that will make flying throughout Europe more expensive for airlines and travelers, as carbon emissions are targeted to be decreased.

"It will also distort competition and impact on the sustainability of the aviation industry if it proves impossible to implement with the competitive neutrality promised by policymakers," Spohr told the source.

Reuters reported that the EU believes its Emissions Trading Scheme is the most fair way to deal with the aviation industry's contribution to global warming. The trading scheme has already been put into practice throughout the EU in other industries.

Some experts, however, argue that some airlines are using the emission trading scheme as a smokescreen in an attempt to get more money from consumers.

"If you look at the impact on the ETS, that only starts kicking in at the end of the year," said Dutch Green member of the European Parliament Bas Eickhout. "It's very clear that they're (airlines) looking for excuses in more or less the same way power companies did when the ETS started."

The source reported that the measure is expected to cost billions in 2012 and early 2013. By March 2013, however, airlines will be asked to surrender enough permits to cover their emissions from 2012, or else suffer a penalty. Thus, it is hard to see the impact of the plan until 2013.

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