Carbon tax to take a heavy toll on ME fleets

DUBAI — European Union’s ‘penalising’ carbon tax will have far-reaching impact on the aviation industry in the Middle East region given the projected surge in the number of commercial aircraft from 950 at present to 2440 by the 2029, aviation experts said.

By Issac John

Published: Fri 24 Feb 2012, 11:17 PM

Last updated: Tue 7 Apr 2015, 11:18 AM

The Middle East region will record 7.1 per cent increase in air passengers annually until the year 2029, while recording 6.8 per cent annual growth in the freight segment.

Georges Hannouche, a leading aviation industry expert, said the ‘unilateral’ initiative of the new carbon tax — Emissions Trading Scheme (ETS) imposed on the flights into and out of Europe was nothing short of ‘penalising’ the Gulf carriers despite having a young and fuel-efficient fleet.

“Many people in our region believe, and it is my personal opinion as well, that our airlines have invested millions in a young and fuel efficient fleet but are still being penalised. We should strongly oppose to such unilateral initiatives,” he said during a presentation on Green Airports at the opening day of the Green Aviation and Logistics Conference on Wednesday.

From March 1, passengers flying to Europe from the Gulf will have to pay more to offset the ‘carbon tax’ with Etihad Airways becoming the first airline in the region to introduce a surcharge.

The UAE national carrier recently said it would increase fares by $3 per passenger for flights into and out of Europe and $0.03 per kg for cargo shipments, which will take effect for travel from March 1, 2012.Other Gulf carriers are also expected to follow suit. Emirates has hinted that it would have to hike fares to offset the increased costs.

Etihad Airways said in August the ETS scheme could escalate its operating cost by up to $719 million by 2020.

An Emirates airline spokesman estimated that in 2012 alone, it will cost the airline over €40 million to purchase additional emissions allowances to comply with the scheme, and well over half-a-billion euros in the nine year period to 2020.

Airlines across the world, reeling under higher fuel costs, will have to incur an additional burden of $670 million in 2012 under the carbon tax regime. The EU tax aims to mitigate the impact of climate change on aviation. Each airline is allowed to emit some carbon dioxide for free each year, but they will have to buy ‘carbon credits’ from other airlines or industries if they exceed their allowance.

Under EU’s regulations meant to tackle climate change, airlines touching down or taking off in the 27-nation group and three neighbouring nations will be charged for their carbon dioxide emissions.

The International Air Transport Association, or IATA, recently called for a UN-brokered deal to prevent an escalating war between EU and China over carbon emissions.

Hannouche, who is the chief executive of Bayanat Airports Engineering and Supplies, additional cost per passenger is estimated at €1.50 – €3.50. “Whether this can be passed on to the customers depends upon the competitive position of the airlines.”

Hannouche said the Intergovernmental Panel on Climate Change (IPCC), a scientific intergovernmental body established in 1988 by the United Nations, has estimated that aviation is currently responsible for around 3.5 per cent of anthropogenic climate change. The IPCC estimates that the scenarios for 2050 will be between five and 15 per cent.

“The aviation industry is doing a great deal to limit its environmental impact, although it is not the major contributor to the problem. There are not many industries like the aviation which is operating 20 per cent more efficiently now than 10 years ago with ambitious plans to improve further by the year 2020. Implementing green technologies, developing new initiatives in the bio-fuel field, using modern and fuel efficient fleet will certainly have a big impact on limiting the greenhouse gas emissions,” said Hannouche.

“The UAE authorities are looking seriously into environmental issues. I am confident that the UAE will set the pace towards Green Airports in the region,” he said.

Hannouche said the international airlines and countries like the US, China, India and many other countries are looking at ‘coordinated retaliation’ if the Europe tries to enforce these measures. .

From 2012, overall CO2 emissions of the aviation industry are capped: initially at 97 per cent of 2005 emissions levels, and from 2013 onwards at 95 per cent. All operators flying to and from the EU will have to surrender one allowance for every tonne of CO2 emitted on a flight to and from (and within) Europe. The expected growth of aviation sector’s emission is 130 per cent by 2012 compared with 2005 levels.

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