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Airlines Snap Up Bargain Carbon Permits, Rail at ‘Looney Tax’

Air France-KLM and Lufthansa are preparing for inclusion in the EU’s carbon trading scheme by buying allowances at low prices, while Ryanair has declared the program “eco-looney” and levied a 25 cent per passenger fee.

All airlines departing from or landing into EU airports were brought into the Emissions Trading System on January 1 of this year, and must submit permits covering the carbon emissions of these flights.

This year the EU will give airlines 183 million EU aviation allowances – 85 percent of the permits they need – for free. Trading by airlines has been slow since these allowances have not yet been issued, Reuters says. Distribution is expected in late February.

But a Lufthansa spokesman told Reuters the company is “continuously buying allowances.” The company said it would buy 35 percent of its needed permits on the open carbon market this year.

A spokesman for Air France-KLM said the airline plans to buy about 7 million carbon units, spread throughout the year, at a cost of 50 million to 100 million euros ($64-$128 million) in 2012. Air France has also joined the Paris-based carbon exchange BlueNext to help it buy the permits it needs for ETS compliance, Point Carbon reports.

The timing of such permit purchases is good for the airlines, since the cost of EU allowances is low at about 7 euros a ton, not far up from the record low of 6.30 euros a ton from mid-December.

The demand from airlines could help to stimulate the ETS market, which has suffered from an over-supply of permits as well as economic worries. Slovakia’s Commodity Exchange Bratislava is the first market to announce trade in EU aviation allowances, saying its offering would start by the end of February.

Many airlines plan to pass the costs of ETS participation on to customers, or have already done so. Lufthansa earlier announced that it will pass the expected cost of 130 million euros on to customers.

Now Ryanair has announced that its passengers can expect to pay 25 euro cents per flight to cover the cost of the permits. Ryanair’s Stephen McNamara described the trading program as an “eco-looney tax” and said it would cost passengers between €15 million and €20 million this year, according to the Irish Times.

Picture credit: Sylvain Muglia

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