NCPA - National Center for Policy Analysis

The Impact of the European Union Emissions Trading Scheme on U.S. Aviation

January 17, 2012

U.S. airlines could pocket a big windfall by raising fares to Europe beyond what is needed to pay for their carbon emissions, a new study warns.  The study, found in the latest edition of the research publication the Journal of Air Transport Management, says that the airlines could profit by up to $2.6 billion over the next decade by raising prices more than necessary to pay the costs of the European Union's emissions trading scheme, says USA Today.

  • Delta, United-Continental, American and US Airways already have added surcharges to fares on flights to Europe.
  • The charges, mostly $6 on a round-trip ticket, came within days of the European Union imposing its trading scheme on flights in and out of EU countries starting Jan. 1.
  • Robert Malina, the paper's lead author, says the possible "windfall gains" would be the "result of airfares rising more than actual expenses."
  • The airlines won't say why they imposed the new fare charges or that the increases are designed to offset the costs of complying with the EU rule that's designed to limit greenhouse gas emissions out of environmental concerns.

One thing the airlines will say is that there's no way they can profit from the rule, which requires them to buy allowances if they exceed emissions caps.

  • Trade group Airlines for America estimates that complying with the emissions regulation would force U.S. airlines to transfer $3.1 billion to the European Union from 2012 to 2020.
  • OAG, a British firm that analyzes the aviation industry, estimates that complying with the program could cost airlines about 3 percent per passenger, or $15 on a $500 ticket.
  • Andrew Sibley, an OAG spokesman, disputed the conclusion drawn in the study, saying it's "highly unlikely" airlines will profit from the rule because European regulators "will be watching very closely" to prevent airlines from gouging customers.

Source: Bart Jansen, "Airlines Pocket Windfall Profits on Fares to Europe, Study Says," USA Today, January 16, 2012.  Robert Malina et al., "The Impact of the European Union Emissions Trading Scheme on U.S. Aviation," Journal of Air Transport Management, March 2012.

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