Lufthansa CEO calls for Aviation EU ETS to be postponed for a year because of ash cloud distortions
Lufthansa CEO Wolfgang Mayrhuber speaks to journalists at the IATA AGM
Thu 10 June 2010 – Speaking to journalists at the IATA AGM in Berlin this week, Lufthansa CEO Wolfgang Mayrhuber called for the postponement of the Aviation EU Emissions Trading Scheme (EU ETS), due to start in 2012, for a year because of the market distortions caused by the grounding of aircraft due to the volcanic ash cloud in April. As the main impact was felt in Northern Europe and Scandinavia, airlines in these regions would be adversely affected in the allocation of free emissions permits as 2010 is the benchmarking year for the calculation. The Association of European Airlines has reacted angrily to European Commission suggestions that the effect would be very small. Meanwhile, Chinese airlines have joined their US counterparts in attacking the inclusion of international airlines into the EU ETS.
Mayrhuber argued that there would be a discrimination against airlines most affected by the European airspace closures, which would lose free permits in the allocation to airlines that had been least affected, and would therefore have to buy extra permits. Airlines affected by the groundings are currently seeking compensation from the EU for financial losses. The Lufthansa CEO also cited a harsh winter as another contributing factor for this year not being representative as a benchmark.
Perversely, it is in the interests of an airline joining the EU ETS to emit as much carbon as possible this year in order to gain a higher share of the free allocation, which will be based on the overall aviation emissions for the annual average of the years 2004-6.
Other reasons for postponing the introduction of the EU ETS, said Mayrhuber, were that some EU States had yet to include the EU directive into their national legislation and were not ready to implement the scheme, as well as the issue of the outstanding legal action taken by US airlines against their inclusion into the EU ETS.
His call for a postponement was supported by IATA’s Director of Aviation Environment, Paul Steele. “The ash cloud did cause a significant distortion. Where you have a system of allowances that is going to be based on one single calendar year, it seems to me that the EU should take that into account,” he said. “They set the original baseline on an average of three years yet set the allocation of allowances based on just this calendar year, a year when we have the seen the biggest distortions to European traffic we have ever seen.”
Reacting to comments from a European Commission official that the effects of the distortion would be tiny, the Association of European Airlines’ Secretary General, Ulrich Schulte-Strathaus, said: “Some airlines will have to pay €40 million ($48m) more for certificates because their share of the cake in the base year will have changed. To the Commission such sums may be ‘tiny’, to the airlines they certainly are not.
“Misguided political decisions to close airspace, based on deeply flawed assumptions, impacted almost all operators in Europe, but those impacts differed widely. The three largest northern EU operators lost more than 16% of their business in April; for the three largest southern EU airlines the figure was 4%. It is evident that the use of 2010 as a baseline will create significant distortions, disadvantaging all airlines, but particularly those who were hardest hit by the unjustified airspace closures this spring. To pretend that the impact is minimal is wrong and disingenuous on the part of the Commission.”
Meanwhile, China’s aviation industry has complained that including the country’s airlines in the EU ETS is unfair as it disproportionately hits developing countries the hardest, particularly those expanding their flights to Europe.
According to China Daily, the EU ETS could cost Chinese airlines nearly 800 million yuan ($114m) in 2012 and more than 3 billion yuan in 2020. From 2012 to 2020, the Chinese aviation sector could face paying a total of 17.6 billion yuan ($2.5bn) for their EU carbon emissions allowances. There are 33 Chinese carriers on the Aviation EU ETS list of operators published by the European Commission.
Liu Shaoyong, Director-General of the China Air Transport Association and also Chairman of China Eastern Airlines, told the publication that airlines from developed countries had built a mature European network. “Compared to them, who are not likely to add many flights to Europe in the future, carriers from developing nations have much fewer flights now but will expand fast in the future. But from 2012, these fast-growing ‘youngsters’ will have to pay much more than the mature airlines.”
The China Daily article quotes an unnamed official with the Civil Aviation Administration of China (CAAC), who said developing countries like China should be treated differently from developed countries, citing Kyoto Protocol and UNFCCC principles, and imposing the EU ETS on developing countries’ airlines would be detrimental to their development.
CAAC statistics show that for the period January to April this year, China’s air traffic grew by over 30%.