European airlines criticise moves to artificially inflate price of carbon allowances under EU ETS auction proposal
Tue 31 July 2012 – The Association of European Airlines (AEA), which represents 33 European network carriers, has condemned proposals by the European Commission to change the timing of EU ETS allowance auctions in an effort to boost a flagging carbon price, which has now fallen below the seven euro mark. By delaying auctions of Phase III (2013-20) allowances until later in the period, the Commission is hoping to stem the flood of surplus allowances in a market that is already oversupplied. However, the AEA argues that this interference fundamentally changes the principles of a trading scheme defined as a market-based measure. It claims the proposal, announced by Climate Action Commissioner Connie Hedegaard last week, would have a further detrimental effect on European airlines already forecasted to lose 1.5 billion euros this year.
The AEA said the market intervention was like changing the rules of a game that had already started at a time when its members needed stability and regulatory predictability.
“This proposal goes completely in the other direction and will harm industries like aviation which are vital in the recovery of Europe’s struggling economies,” it said in a statement. “We also fail to see how this package can fit into the European Commission’s ambitions for its Europe 2020 growth and jobs agenda.”
Athar Husain Khan, acting AEA Secretary General, said the move could have further impact on negotiations at a global level, with countries opposed to the inclusion of their airlines in the EU ETS now gathering to discuss possible actions against a scheme perceived as a pure tax and not as an environment-friendly initiative.
“The fact that the Commission now wants to artificially manipulate the price setting mechanism of the ETS gives these non-EU states even more arguments,” he said. “There is a lot at stake and it is essential that policy-makers also realise this threat.”
Justifying the proposal, Hedegaard said: “The EU ETS has a growing surplus of allowances built up over the last few years. It is not wise to deliberately continue to flood a market that is already oversupplied. This short-term measure will improve the functioning of the market. If the political will is there, all the necessary decisions can be taken before the next auctioning phase starts at the beginning of 2013. Now it is up to the European Parliament and Member States to deliver. After the summer recess, the Commission will also finalise the options for long-term structural measures.”