Aviation & the emissions trading green paper

As with other emissions intensive industries, the major airlines would be forced to buy emissions permits prior to the proposed 2010 introduction of the trading scheme. But unlike some other industries, such as coal-fired power, aviation operators would not be given their permits free and would likely have to pay market price for them.

In its analysis, the green paper estimates air transport as being responsible for one per cent of total emissions, with 384 tonnes of carbon emitted per $1 million of revenue earned.

The paper also argues that aviation is not an industry which will require assistance, unlike others such as electricity generation.

“Although Australia’s aviation industry produces a significant amount of greenhouse gas emissions through the combustion of aviation fuel, the industry is not highly emissions-intensive. Personal air travel and airfreight are high-value services, so the emissions intensity of the industry, per dollar of revenue, is relatively low,” the green paper said.

But, Qantas CEO Geoff Dixon believes that the government hasn’t fully understood the impact which the extra cost of the ETS would have on the aviation industry’s wafer thin margins.

“We think aviation has probably been singled out in a way that we think is probably unfair. We’ll be making that point to the government. But certainly what we do know and what we’ve seen of the announcements that domestic aviation and including regional aviation will be quite severely affected,” said Dixon on July 26.

“I mean once again, we can’t absorb $100 million cost which our senior analysts are saying would be for Qantas.

We will have to put that cost back onto domestic operations.

I believe that will make domestic aviation much dearer and may well have an impact on domestic tourism.

And we will be making that very plain to government,” he said.

Virgin Blue, which according to a UBS report may face an extra $30 million in costs under the ETS, has also come out against the green paper’s analysis. CEO Brett Godfrey agreed with Dixon, telling Fairfax media, “To suggest that Australian domestic airlines ‘will generally be able to pass on carbon costs because their competitors will face similar cost increases’ ignores the current economic stresses the entire industry is already experiencing. ” There has also been some concern about how the ETS may impact on regional services. Regional Express’s managing director Jim Davis told Australian Aviation, “Whether it be by way of CO2 permits or increased costs at supply there is no doubt that the emissions trading scheme will add to the cost of regional operations and will put further pressure on marginal air services. Such costs cannot be absorbed by operators and would have to be passed on to consumers.

“The extent of these costs has yet to be determined but if for example the price of CO2 permits were to be the same as currently exist in the European emissions trading scheme then companies like Rex would be paying in excess of $1 million per annum. ” While it appears that smaller regional operators will not be forced to pay for emissions permits as the major airlines will, Paul Tyrell from the Regional Aviation Association of Australia says that with refiners forced to charge more for fuel, regional operators may be affected downstream.

“I know among our members 30-40 per cent of the cost is fuel and if you add to the cost, you’re getting up to close to half the cost of running the business,” he said.

“We’re not panicking because there’s a fair way to go in this policy development. So we’re going to be putting together a fairly comprehensive response and we’ll continue to educate the government about the impacts of emissions trading. ” But not all within the industry have been negative about the ETS. At the recent 2008 Australia Pacific Aviation Outlook Summit, Airservices Australia CEO Greg Russell said, “I think it’s better to be in the emissions trading tent than outside it.

If aviation was excluded, it would continue in my view, to be subject to public pressure over its real or perceived environmental impact and would eventually, inevitably in my view, be subject to some form of regulation with the aim of reducing either demand or capacity. ” o Qantas and Virgin Blue have spoken out against the extra costs which would be imposed on the airlines as a result of the proposed emissions trading scheme. (Paul Sadler)