Air travelers face higher fares under newly introduced EU rules to tackle aviation emissions and fight climate change. This is a sign that the era of ultra-cheap flights may be over.
The threat of higher fares comes as airlines raise fares to help them recover from the coronavirus pandemic as demand for flights recovers following the end of travel restrictions.
The EU wants to make carbon-intensive industries pay more for their pollution, as analysts say return ticket prices are likely to rise by up to €10 due to rising aviation emissions.
EU lawmakers have given preliminary approval to an update to EU carbon pricing rules that will force industry, including aviation, to buy enough allowances to cover the emissions trading system.
The rules phase out the current practise of allowing airlines to receive a significant portion of the required licences for free by 2026. Over time, the total number of emissions permits in the system will also decrease, which analysts believe will increase pollution costs.
Olivier Jankovec, chief executive of the Airport Industry Association (ACI) Europe, said at an industry conference that the EU is undergoing a “major political reorganization” that would change the “economics of the sector.” “This will lead to higher costs for airlines, higher prices, and lower demand.” Industry lobby group Airlines for Europe said “EU-style sustainability legislation.” Flying through European Union hubs like Amsterdam, Paris, or Frankfurt could become around 23 percent more expensive in 2035. This could lead to up to 17 percent fewer passengers travelling through EU hubs.
Ryanair boss Michael O’Leary previously said rising environmental taxes, combined with rising oil prices, meant the era of absurdly cheap fares was over.
The cost of complying with the EU’s emissions trading scheme will rise to €5 billion for the EU’s six biggest airlines in 2027, up from €0.5 billion in 2019, Bernstein analyst Alex Irving estimates. “Airlines can’t handle it. “… and prices must be raised,” he said. He estimated that
Passengers would pay €8–€10 more for a return journey.
Deutsche Bank analyst Jaime Rowbotham predicted that Ryanair, easyJet, and Wizz Air would spend a combined €785 million on carbon subsidies in 2023 in the financial year, which corresponds to approximately EUR 2.60 per passenger journey. According to him, it could rise to 2.25 billion euros in the middle of the decade.
EasyJet said it was impossible to predict future prices, but the industry needed more government support to achieve zero emissions.
Ryanair said last year it had used €51 million in credits and said that in the “medium to long term,” it would not be able to “eliminate” the impact of rising emissions through future hedging. Emissions prices in the EU systems were almost at an all-time high on Friday, at almost 100 euros per tonne. Permits enable the owner to emit one tonnes of CO2.The revenue from the emissions trading system will be channeled towards increasing the use of sustainable aviation fuels.
Airline emissions account for approximately 3 percent of EU greenhouse gas emissions, most of which come from international flights.
The European Emissions Trading System is the flagship of the EU’s plan to reduce greenhouse gas emissions by 55 percent by 2030 compared to 1990 levels.
Climate change campaigners see the polluter-pays scheme as an effective way to reduce carbon emissions and have called for it to be expanded.
“A fair share of emissions should be paid by airlines,” said Jo Dardenne, head of aviation at the Transport and Environment Organization. Green MEP Bas Eickhout called for free allowances to be scrapped as soon as possible, calling them “fossil subsidies.”
Airlines have been covered by the ETS since 2012, although only on flights within the European Economic Area. Countries such as China and the United States have successfully resisted efforts to extend it to flights outside the region.
The carbon dioxide emissions of European airlines are not only increasing, The EU is also negotiating rules to ensure the use of sustainable aviation fuels—less polluting alternatives to fossil fuels—and to increase taxation on kerosene.
The upgrade of the emissions trading system will not take effect until the final law is approved by the European Parliament and EU environment ministers in the spring.
Leave a Reply