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Emirates faces $1bn bill over EU carbon tax

Carbon cuts set to hurt fast-growing carriers from the Gulf region.
NEWS, Aviation

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Dubai’s Emirates Airline, the biggest international carrier by traffic, expects the European Union’s programme limiting carbon emissions to cost the carrier $500m to $1bn.

Emirates flights will be subject to EU limits from 2012, Andrew Parker, senior vice-president of environmental affairs at the airline, told reporters in Dubai on Monday.

The Gulf’s largest airlines – Etihad, Emirates and Qatar Airways – have rolled out ambitious expansion plans that include the ramping up capacity on their European routes.

The Dubai carrier plans to increase its fleet to eventually include 120 Airbus A380s, a model that produces 75g of CO2 per passenger kilometer; almost half of the European target for cars manufactured in 2008.

Beginning in 2012, airlines landing within the EU will have their carbon dioxide emissions capped at 97 percent of their average 2004-06 levels and 95 percent in 2013.

Airlines will face fines of up to €100 for every tonne of carbon dioxide they emit above the limit, in a bid to cut pollution by five percent through 2020.

Abu Dhabi’s Etihad Airways last week told Arabian Business the tax could cost it up to €500m ($719m) over the next eight years, based on “potential carbon prices as high as €60 per tonne”.

The EU ruling has been met with dismay by US airlines, who estimate the law could cost them $3bn through to 2020. The Air Transport Association of America, the nation’s largest airline body, has branded the scheme illegal and said it will hurt industry growth if allowed to go ahead as planned.

“[The scheme] violates international law, including the sovereignty of the United States and imposes an illegal, exorbitant and counterproductive tax,” vice president of environmental affairs Nancy Young said in a statement.

Toby Stokes, Middle East aviation sector leader at Ernst & Young, said the taxes would prove an additional burden on airlines’ balance sheets, already squeezed by high oil prices and increased competition.

“The green agenda is a particularly tough issue for the industry. While airlines are experimenting with more environmentally-friendly fuels, I think it will still be sometime yet before the majority of commercial flights are on a plane powered by nut oil and seaweed.”

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