Carbon targets will start to hit Irish airline travellers soon

ANALYSIS:Plans to cut carbon emissions could cost passengers between €10 and €40 per flight.

EUROPE'S EMISSIONS trading scheme (ETS) has barely grabbed the public's attention. It is, as Donal Buckley of employer group IBEC concedes, a subject "strictly for anoraks".

Since January, however, the ETS has become fully operational as it aligns itself to the targets set by the Kyoto Protocol until 2012.

Ireland will end up being a net contributor, by as much as €50 million this year, with some costs being borne by the public.

What might ultimately jolt public awareness may be a decision made by the European Parliaments environment committee last Tuesday. It proposes that airlines should be included in the scheme from 2011 onwards and that emissions be capped at 90 per cent of current levels.

With aviation still on a steep growth path, this would mean higher air fares for consumers. The German MEP Peter Liese, who drafted the proposals, reckons it will cost passengers up to €10 on flights within the EU and €40 or more for transatlantic journeys. Even if the parliament proposals are not adopted, the commission still plans to include airlines in ETS by 2012.

Since 2005, some 12,000 European companies and utilities (including 100 Irish businesses) have been included in the scheme, which caps allowable emissions.

Those who exceed their quota must purchase credits; those who have a surplus may sell them at the market price. Irish companies in the scheme include ESB, cement groups, dairies and significant energy-users like Intel.

Ireland's allocation is pegged to the states Kyoto allowance of 62.8 million tonnes per annum - at present, our emissions are closer to 70 million tonnes.

The scheme was piloted in 2005 but the allowances were too generous and the price of carbon collapsed. It has become tighter with Ireland's allocation dropping from 22.4 million tonnes in 2005 to 21 million in 2007.

According to the EPA, Ireland will become a net contributor this year. Some companies have already gone into the market to buy credits at €25-€28 a tonne. According to some estimates, Ireland will be buying some 3.5 million tonnes by 2012.

The fact that there is no equivalent scheme elsewhere in the world has led to criticism that Europe will lose out to competitors like the US and China.

The costs will begin to bite more after 2012. The allocations will gradually fall by 21 per cent forcing companies to become more energy-efficient, reduce capacity, or buy more credits, possibly costing up to €60 a tonne.

Buckley points out that emissions trading must include all countries and all regions in the world, and not just be confined to Europe. Otherwise we will see a shift in investment to outside the EU, he says.

Neither Ryanair nor Aer Lingus likes the idea of a scheme that does not include non-EU airlines. Ryanair chief executive Michael O'Leary argues that, as currently constituted, it is "just a way for Europe to tax itself out of existence while no other country in the world joins".