Flying into Cloud: Will EU’s Emission Scheme Get Off the Ground?

A new European Union (EU) scheme gets
introduced from 1 January 2012 which will punish airlines for polluting the
skies. Airlines object as it could lead to higher airfares for passengers and
fewer direct flights to Europe. The EU has refused to compromise so far, setting
the stage for a showdown. British Airways said the airline intends to comply
with the scheme, but the nightmare scenario would be a tit-for-tat seizure of
planes across countries.

By Feng Zengkun  in Straits Times (24 Noveber 2011):

A BREATH of fresh air could
become more expensive from next year for anyone visiting Europe. But for
Singaporean travellers, an air ticket to the continent could come at an even
higher price, given the longer distance.

This is because a new fee will
kick in on Jan 1 to punish airlines for polluting the skies. Airlines have been
coy about it, but analysts said the extra cost could well be passed on to
passengers.

Only flights that use European
Union (EU) airports are affected. On a Singapore-Jakarta-Frankfurt flight, for
example, only the Jakarta-Frankfurt leg will be counted.

Keeping airlines in check

FROM Jan 1, a new European Union
(EU) scheme will punish airlines for polluting the skies. This could lead to
higher airfares for passengers and fewer direct flights to Euro

When it was introduced: 2007

When it takes effect: Jan 1, 2012

How long it will last: Until
2020, but could be extended after that time

What is affected: All flights
that take off or land at EU airports

How much it is expected to cost
airlines: US$18 billion (S$23 billion) over the eight years, although the EU
disputes this.

How it works:

•Airlines calculate their total
pollution each year by multiplying the fuel used on affected flights by a
carbon dioxide emissions factor.

•They submit the figures to the
EU, which independently verifies them.

•Each airline is given an annual
free emissions ‘allowance’. They will have to pay if they exceed this
allowance.

•To do this, they have to buy
‘carbon credits’ from other airlines which have not exceeded the cap; airlines
can ‘bank’ unused credits.

•They can also buy these credits
from other industries; the EU scheme has already been rolled out to other
sectors such as the paper industry.

•If the airlines fail to pay the
owed fees, they will be fined €100 (S$175) for each tonne of carbon dioxide on
top of what they owe.

•The scheme is administered by
different EU states, which have additional penalties for continued
non-compliance. These include banning airlines from entering EU airspace or
seizing their planes.

The fuel used on these flights is
multiplied by a standard carbon dioxide emissions factor to calculate the total
pollution.

The EU will monitor airlines’
emissions each year between next year and 2020. The scheme could be extended
after that time.

While each airline will be
allowed to emit some carbon dioxide for free each year, they will have to buy
‘carbon credits’ from other airlines or industries to pay off the pollution if
they exceed the allowance.

Since the scheme was announced by
the EU in 2007 as part of a larger green plan, it has been heavily opposed by
the aviation industry.

The International Air Transport
Association (IATA) estimated that the scheme will cost airlines US$18 billion
(S$23 billion) over the next eight years, but the EU disputes this.

An IATA spokesman told The
Straits Times that the industry is already being battered by rising fuel costs,
which have increased by 60 per cent since last year.

In a bid to counter the EU
scheme, airlines set its own target to reduce emissions by 50 per cent by 2050,
compared to 2005. But EU lawmakers were not persuaded.

The industry now emits 2 per cent
of all carbon dioxide. But in Europe alone, the number of flights is expected
to treble in the next four decades, to around 25 million flights per year in
2050.

Lufthansa, Europe’s largest
airline, said it will have to pay up to €300 million (S$528 million) next year
under the scheme, a third of its profits for last year.

The free emissions allowance will
also be lowered by three percentage points in 2013, which means airlines will
have to pay more between 2013 and 2020.

Flights from Asia to Europe will
be affected more because of the longer distance; Singapore Airlines (SIA)
declined to provide a dollar figure but said 9,000 of its flights will be
affected each year.

Cabins without toilets?

WITH the new fees being
inevitable, passengers could end up absorbing them, said Mr Paul Ng, global
head of aviation at law firm Stephenson Harwood.

Airlines such as British Airways,
Lufthansa and SIA told The Straits Times they have not ruled out doing that.
But at the same time, airlines have been on a drive to find ways to cut
emissions to avoid paying the fees.

One way is to offer fewer direct
flights. A Singapore-London flight, for example, could be broken up into two
separate flights with a stopover just outside the EU.

This would reduce the amount of
fuel that falls under the scheme, since only the shorter, latter leg would be
counted.

But Mr Ng said such actions
carried risks.

‘No one wants to be the first to
inconvenience passengers or charge higher prices. Passengers would just go to
another airline,’ he said.

Mr Ng added that airlines cannot
collude to charge higher prices together as this is illegal.

Another way is to cut short-haul
flights if other transportation methods are available.

Lufthansa cut its
Frankfurt-Cologne flight in 2007 because there was a faster high-speed train
route. It now operates a carriage on the train

This will mean that Singaporeans
travelling abroad may find fewer short-haul flights within the EU in the future

Mr Ng Chin Hwee, SIA’s executive
vice-president for human resources and operations, said airlines can also
reduce the fuel used by making the planes lighter.

The airline is currently
conducting a trial on electronic magazines and newspapers, which are installed
on its in-flight entertainment systems.

The paper versions can weigh up
to 1,000kg on flights, according to trade magazine Enviro Aero. It also
estimated that a plane could save 34,000 litres of fuel a year by reducing the
weight of each passenger seat by 1kg.

Mr Jonathan Galaviz, chief
economist at Galaviz and Company, which does consultations for airlines, said
the industry is also looking into lighter food carts and seats.

He said airlines could consider
lowering baggage limits, ‘but there has to be a balance between customer
satisfaction and airline profitability’.

In an extreme example of
cost-cutting, Ryanair last month announced that it would remove two out of
three toilets on its planes to add more seats. While the additional seats may
not make the plane lighter, it will earn the airline more money.

Planes powered by biofuel

BUT these short-term measures may
not be enough.

The potentially hefty price tag
has led some airlines to look into other, more long-term measures, such as
changing their fleet of planes.

Newer planes such as the Airbus
A-380 and Boeing-787 Dreamliner transport more people and use up to 20 per cent
less fuel per passenger compared to older models, but each plane takes years to
produce.

Many airlines, including Lufthansa,
Continental, Qantas and SIA, are also investing in biofuels, which are not
counted under the scheme.

These are fuels made from plants
such as jatropha and canola seeds. But some are controversial because
environmentalists say forests could be razed to make way for them, harming the
planet even more than conventional fuel.

In July, Lufthansa started
testing a jet fuel made up of 50 per cent biofuel on a flight between Frankfurt
and Hamburg. The findings will be ready only in a few years.

Dr Alexander Zschocke,
Lufthansa’s senior manager for biofuels, added that alternative fuels are still
too expensive to help airlines in the next few years.

‘They now cost two to three times
more than conventional fuel, which would wipe out any savings under the scheme,’
he said.

Other airlines told The Straits
Times that more can be done to shorten flight routes between countries.

Mr Petteri Kostermaa, Finnair’s
sales director for Singapore and South-east Asia, said: ‘Right now, many flight
routes zigzag due to restrictions imposed by air traffic control. This is not
efficient.’

Even changing the planes’ noses
to reduce wind resistance and inventing smoother paint – both being researched
now – would shave precious tonnes off the airlines’ fuel use.

Nightmare scenario

BUT the greatest and most
immediate threat to passengers and airlines is what will happen if airlines do
not pay the fee.

The scheme includes clauses to
revoke airlines’ operating licences in the EU and to seize their planes if they
do not pay owed fees. This would cause chaos for airlines and passengers.

The United States last month
voted to ban its airlines from paying the fee. It said the EU scheme was
illegal.

The Air Transport Association of
America is also suing the EU in the European Court of Justice over the scheme,
saying it violates international aviation law. A ruling is expected by the end
of the year or early next year.

Several Chinese airlines plan to
bring a similar suit by year end.

But the EU has refused to
compromise so far, setting the stage for a showdown.

Mr Jonathan Counsell, head of
British Airways’ environment department, said the airline intends to comply
with the scheme, but the nightmare scenario would be a tit-for-tat seizure of
planes across countries.

‘We all hope that a compromise
can be reached. But there’s not much time left,’ he told The Straits Times.

Source: www.straitstimes.com