EU CO2 loophole may aid Ryanair

Wed, Nov 14, 2007, 00:00

Irish taxpayers could have to carry the cost of Ryanair's greenhouse gas emissions, even from flights that never take off from or land in Ireland, due to a loophole in new emission trading regulations proposed by the European Commission, it has been claimed.

The EU intends to include the aviation industry in its emissions trading scheme, which limits the amount of CO2 companies can produce and forces them to buy extra allowances or "carbon credits" if they exceed their allocated permits.

Aviation has until now been exempt from the scheme. The European Parliament yesterday backed the commission's proposals to extend the scheme to the aviation sector.

Under the current scheme, which began in 2005, member states have a set amount of carbon credits to disburse to their industries. Because the aviation sector is a new entrant to the scheme, separate aviation allowances are being created.

However, a clause in the regulations allows airlines to exchange aviation allowances for national allowances. An airline can only make an exchange with the member state in which its company is registered and the member state cannot refuse the exchange and cannot impose any financial penalty on the airline for making the exchange.

Once a member state has received aviation allowances resulting from this exchange, it can only trade them on to another airline, and cannot use the credits on any other industry. If a state is left short of national allowances after surrendering them to an airline, it must buy extra credits on the open market.

An additional difficulty arises in relation to the price of the two types of credit. If aviation allowances are in good supply, they may have a lower monetary value on the open market than national allowances. If this emerges, airlines are likely to be even more enthusiastic about making the exchange and states could find themselves paying a high price to buy additional national allowances, but achieving a low price for the aviation allowances.

Fine Gael MEP Avril Doyle said this clause could sharply reduce Ireland's supply of national allowances, if a large airline such as Ryanair chose to cash in their aviation credits.

"The Irish registry will carry a disproportionate share of flights on our books due to the size and geographic spread of some airlines, particularly Ryanair, which is registered with the Irish Aviation Authority for all of its EU operations."

Ms Doyle added: "If they (Ryanair) chose to convert their allowances for these flights, the Irish taxpayer could end up financing a windfall profit. That's not what the scheme was designed for."

The European Parliament yesterday passed an amendment that would remove this clause from the regulations. However, this amendment must be ratified by the council of ministers and supported by the commission to become part of a directive.

MEPs also voted yesterday to bring forward the inclusion of flights to and from non-EU countries into the emissions trading scheme. The commission's regulations apply to flights within the EU from 2011 and all flights to and from EU airports to non-EU countries from 2012.