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Airlines to Be Second Biggest Sector in EU Carbon Market; Energy Firms Want Tough Targets

The aviation sector will be the second-largest industry in Europe’s carbon trading system when it joins the market next year, the European Commission (EC) announced today.

The EC announced that airlines’ carbon dioxide limit will be 213 million metric tons in 2012 and 208.5 million metric tons in 2013, Bloomberg reported. That will make the industry’s carbon cap second only to that of power generation.

The limits will apply not only to European businesses but to others, such as AMR’s American Airlines, that operate flights in Europe.

“Firm action is needed,” climate commissioner Connie Hedegaard said in a statement. “Emissions from aviation are growing faster than from any other sector, and all forecasts indicate they will continue to do so under business as usual conditions.”

The European Union’s cap-and-trade system is the world’s biggest, covering more than 11,000 power plants and factories. Businesses that exceed their CO2 allowances must buy spare permits from companies that emit less, or else pay a fine.

The commission said that the cap could push the cost of a roundrip flight from Brussels to New York up by about 12 euros, assuming the current carbon price of about 15 euros. Roundtrip air fares within Europe may rise between 1.80 euros ($2.52) and 9 euros, the commission said.

The airline industry has said that the carbon trading rules would cut profits by billions of euros, because operators will find it difficult to pass the costs on to travellers. Lufthansa said that joining the carbon market will cost it about 350 million euro a year.

Bloomberg New Energy Finance said that in 2012, airlines will add 32 million tons of demand for EU carbon allowances, which would be valued at 508 million euros at today’s prices.

In related news, on Friday some of Europe’s biggest energy companies urged the EU to enact stricter greenhouse gas reduction targets.

Companies including Scottish & Southern Energy, Dong Energy, Eneco and Statkraft issued a statement saying the EU should raise its carbon-cutting target to 25 percent by 2020, compared with 1990 levels. The current target is a 20 percent cut by 2020.

This means tightening the emissions cap under the EU’s carbon trading system, they said.

But the steel industry said lowering the carbon cap will impede its ability to compete with companies overseas.

Tomorrow commissioner Hedegaard is due to launch a strategy paper outlining her energy vision. She is expected to say that energy saving measures could help the EU cut its energy use by 25 percent at little cost to industry.

Picture credit: Sean MacEntee

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