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Volcano Triggers Higher Emissions Trading Costs for Airlines

Europe’s airlines could be facing higher costs to buy emissions certificates after an ash cloud from an Icelandic volcano shutdown flights, reports Reuters. Under the European Emissions Trade System (ETS), each airline gets a certain number of free certificates, which is partly based on its emissions in 2010.

This means the less airlines fly, the fewer free certificates they will get when the ETS includes airlines in 2012. IATA estimates that it will cost airlines 3.5 billion euros ($4.5 billion) in the first year for certificates with an increase every year after that.

Analysts told Reuters the ETS scheme will likely complicate the allocation of allowances. Some analysts also are concerned that if the EU does not adjust the 2010 figure to account for recent events it will be extremely difficult for the sector to deliver emission reductions.

This is on top of the estimated loss of more than $1.7 billion in revenues due to the volcano crisis, according to the International Air Transport Association (IATA).

The downturn also has contributed to significant losses over the past two years. World airlines lost about $9.4 billion last year, and most likely will lose another $2.8 billion this year, according to IATA.

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