Study: Airlines can profit from EU carbon tax

— -- Despite their opposition, airlines will profit from the European Union's program to charge for carbon emissions by charging passengers for the costs in higher fares, according to a report to be released today.

The report from Climate Advisers, a consulting group that helps companies deal with climate policies, and the Center for American Progress, a left-leaning think tank, coincides with a meeting in Moscow of officials from 26 countries to discuss opposition to the program, which began Jan. 1.

Among the attendees are China and India, which have refused to participate in the European program, along with other opposing nations, such as the United States, that are seeking a political compromise. But Siim Kallas, the European Commission's vice president for transport, and Connie Hedegaard, the European Union's climate commissioner, say the union won't suspend the program.

Europe's emissions trading program capped greenhouse-gas exhaust and will charge airlines for any flights that leave or arrive on the continent. The program initially provides 85% of emissions allocations for free, which is why studies project that airlines will profit from them as they charge passengers for the cost of the program.

The new report, which summarized the findings of 37 previous studies, says European airlines will profit more than U.S. airlines because they have more flights affected. Major hub-and-spoke carriers will profit more than discount regional airlines because tickets for larger airlines are less vulnerable to price hikes.

"It's not because they are fleecing their customers or they are stealing from their customers in some way," says Samuel Grausz, the report's lead author from Climate Advisers. "It's the way the policy was designed."

Andrew Light, senior fellow at Center for American Progress and a professor at George Mason University, says the European program could spur talks for a global program after years of stalled talks at the United Nations.

"What the EU has done here will move the conversation quicker," Light says.

U.S. airlines, which fought the program in European court and lost, contend it's unfair for covering flights largely outside Europe. In addition, the program will collect money for their general government treasuries rather than specifically environmental causes.

Nancy Young, vice president of environmental affairs for the industry group Airlines for America, says the program will place a $3.1 billion burden by 2020 on airlines already struggling with profitability.

"It is a myth we will profit from it," Young says. "The airlines will lose some money. The customers will lose some money. The question is, why should they?"

Young says airlines already are reducing emissions voluntarily with newer planes, better flight routes and new fuels. She and Tony Tyler, chief executive of the International Air Transport Association, each suggest the dispute should be resolved globally, perhaps through the International Civil Aviation Organization.

Harsher options that could emerge from the Moscow meeting include countries pursuing international penalties against Europe or retaliating against European airlines in a trade war.