British Airways expected to receive 100 million Euros of free carbon allowances next year
The UK Environment Agency and Scottish Environment Protection Agency (SEPA) have calculated the number of free carbon allowances that airlines regulated by the UK will receive in 2012 when they join the EU emission trading scheme.
Each member state within the EU is responsible for regulating the carbon emissions of the 5,000 airlines that are expected to face regulation in Europe’s cap-and-trade carbon market next year.
British Airways (as a separate entity to parent company IAG) tops the UK list, receiving around 10.3 million EU allowances for free next year, which are worth over 103 million Euros ($136 million) at today’s value. Emirates is in second place, with 4.3 million EU allowances, Easyjet is in third place with 3.7 million carbon permits, and Virgin Atlantic in fourth place with just under 3.6 million.
There are three US airlines in the top ten UK list: American Airlines will receive 2.75 million EUAs; United Airlines will receive 2.4 million; and Continental Airlines will receive around 2.15 million. There are also two Asian Pacific airlines: Cathay Pacific and Singapore Airlines that will receive 2.38 million and 2.24 million EUAs respectively.
The last airline in the top ten UK list is Thomson Airways, a British holiday company, which is expected to receive 2.3 million allowances. Only 900 airlines applied for free carbon allowances, although these operators will still account for the vast majority of the industry’s emissions.
Under the rules of the scheme, airlines will be given free allowances totalling 85% of the industry’s average annual carbon emissions in 2004 and 2006. With the industry growing sharply over the seven years, this will leave airlines short of the required number of permits needed when they join the emissions trading scheme next year.
Airlines that receive free allowances from the European Union will be able to use them to mitigate the cost of complying with the European Emissions Trading System from 1 January, 2012. OPIS’s Clean Assessment for cargo-delivered jet fuel in Northwest Europe with carbon compliance costs included reached $990.50/mt on Tuesday. The forward price for 2012, which assesses the price airlines can lock in using futures and swaps, is lower at $967.80/mt. This largely reflects a bearish view of forward oil markets. Carbon allowance futures (EUAs) for December 2012 delivery settled at €10.54 yesterday, some 44 Eurocents higher than the December 2011 price.