Airlines Developing Different Strategies For Acquiring Carbon Credits

Airlines Developing Different Strategies For Acquiring Carbon Credits:

Airlines flying in Europe are finding different ways for handling the new emission trading scheme that took effect at the beginning of the year. While many airlines in North American and Asia continue to question the validity of the requirements to purchase carbon credits, several European carriers are developing plans for buying and trading carbon credits.

Germany’s Lufthansa told Reuters it has been continuously buying up credits on the open market. Currently carbon credits in Europe are at bargain prices. The price is about half of what it was in 2010 at roughly 7 Euros per ton of carbon. The requirement to buy carbon credits is effectively a tax to provide an economic incentive to minimize emissions of C02 by the airlines.

As of January 1, airlines flying to and from EU airports must have enough carbon credits to cover the emissions from their flights. The airlines join power and industrial plants in the EU that have been submitting carbon credits since 2005. Under the plan the airlines are given a number of free carbon credits to cover some of their operations, they must acquire the remaining credits either through trade or purchase.

Members of the Star Alliance group which includes United and Lufthansa told Reuters they will likely use a broker to help members buy credits on the open market at discounted rates. Airlines in the rival SkyTeam including Air France and Delta are expected to trade internally with members of the airline group to acquire some of the needed credits, purchasing the rest on the market.

Some United States carriers have already said they will be adding a surcharge to cover the cost of the credits.

A representative of Air France told Reuters the fleet will receive a free allocation of about 12.6 million tons of credit, but it expects to emit between 16-17 million tons for 2012.

Both Air France and Lufthansa say they are buying credits directly from a Paris based exchange known as BlueNext.

In the coming years airlines are expected to begin hedging and trading carbon credits in much the same way they do with jet fuel today. Buying and trading of carbon credits is expected to pick up dramatically this year as the airlines will be required to submit their credits against the free allocations.

Photo: Lufthansa