Study suggests EU carbon law could boost US airline profits
January 11, 2012, 08:04 pm
A recent study from the U.S. Federal Aviation Administration predicts the European Union's new Emission Trading Scheme could actually help U.S. airlines increase their profits by at least $2.5 billion by 2020.
The airlines could see higher profits because they will likely pass all associated costs of the new carbon law onto the passengers through increased ticket prices. The findings of the study contradict reports form U.S. airlines that claim the new EU tax will cause the airlines to suffer losses, in conjunction with rising fuel prices and other expenses.
The researchers found that if carriers pass along all additional costs associated with the new EU requirement onto consumers, their profits will increase. If the airlines only pass along the cost of allowances purchased or none at all under the new law, they will see reduced profits.
In the first year of the ETS, international carriers will be granted emission permits that will account for 85 percent of the industry cap under the law for free. The remaining 15 percent will be put up for auction for carriers to purchase for more flights. The new scheme favors the most efficient carriers who emit the least amount of carbons into the atmosphere, thus hoping to encourage the development of greener aviation practices.
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