British Airways is “reviewing” whether to pass on the costs of emissions trading to passengers from January.
Airlines will join the European Union emissions trading scheme (ETS) on January 1 amid claims the scheme could add up to €40 (£35) to some fares. However, the EU insists the costs “should be below €2 (£1.75) per passenger each way” on a long-haul flight – “less than most airport taxes and charges”.
The EU has suggested airlines could even make money from the scheme by charging passengers for the majority of allowances they receive free, which would add about €12(£10.40) to a one-way long-haul fare.
Airline association IATA dismissed the EU claim, warning the scheme would cost carriers $1.2 billion (£760 million) in the first year. A BA spokesman said of the cost to passengers: “We are keeping it under review.”
The spokesman declined to comment on the costs of emissions trading, on whether it would absorb the cost or pass part or all of it on to passengers, and whether the carrier would show any costs in a breakdown of fares – as with other fees and charges.
Willie Walsh, chief executive of International Airlines Group – the parent company of BA – has previously warned fares would have to rise to cover the cost of ETS, saying: “This will add billions to the industry’s cost base and airlines are unlikely to be able to absorb the cost.”
The UK Department of Energy and Climate Change (DECC) recently announced the allocation of emissions allowances to airlines, giving BA allowances for almost two-and-a-half-times the volume of emissions of nearest rival Emirates and almost three times as much as easyJet and Virgin Atlantic.
The allowances are based on annual emissions and BA has the biggest fleet flying the longest distances from the UK. Carriers must pay for any additional allowances at auction.
Economic secretary to the Treasury Chloe Smith said last week that UK government revenue from emissions trading would be “only around £0.1 billion a year, reflecting the fact that most allowances will be given to airlines free”.
EU members have agreed all income from auctioning aviation allowances will go to tackle climate change – unlike revenue from Air Passenger Duty.
Emissions trading will be the subject of a conference on Aviation Law and Policy in London on Wednesday, organised by Butterworths. Lawyers and executives from BA, Lufthansa, easyJet, Delta Air Lines and other carriers will also debate passenger rights, regulatory rules and the airline insurance market.