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ETS - A FAIR TRADE?

ALREADY AT THE MERCY of unpredictable oil price fl uctuations, airline planners will have to contend with yet another variable when the aviation industry is forced into Europe's emissions trading scheme in 2012. Speaking at the Institute of Travel Management's recent 'ECO-nomics' forum, British Airways' head of environment, Jonathon Counsell, warned that the scheme - known as the ETS - would make airline pricing even more difficult.

From January 1, 2012, all flights using European Union member countries' airports will be subject to the ETS. In the first year, the airline industry - or at least those affected - will be told to cut emissions to 97 per cent of the average annual emission measured from 2004 to 2006. From January 1, 2013, that 'allowance' will be cut to 95 per cent. The problem comes with the ETS 'credits' scheme.

Most of the credits will be allocated, airline by airline, on the basis of their emissions performance in 2010. However, 15 per cent of the total credits will be auctioned off to the highest bidder, forcing less environmentally-friendly airlines to pay for their polluting habits. Equally, 'green' airlines that do not use up their allocation will be allowed to sell surplus credits to those carriers - potential rivals - who do not come up to eco-scratch.

The price will not be fixed, but will be left to market forces, with Counsell putting the potential cost at between £500 and £1,000 per ton of CO2 emitted - but, as will the oil price, that could fluctuate wildly.

"Our biggest problem is that we simply do not know," says Counsell. "It's just another variable that we have to build in and there is, potentially, considerable margin for error."