From January 1 all airlines flying in and out of the European Union will need to meet a specific carbon emission requirement. Though protests have been voiced from various countries, the European Union is going ahead with the emission caps for the airlines.

A senior oil industry official said, “We are at present producing jet fuels which meets the specifications laid out. Currently, there is no communications for any change in these specifications like was in the case of auto fuels – up gradation to Euro I-IV.”

However, tomorrow if there is any change proposed then the refiners will need to upgrade the quality. The refiners also export jet fuel. In 2010-11 the refiners exported 4.48 million tonne of jet fuel.

The norms are more for the airline than the refiners, industry sources say. Indian carriers operating to Europe are likely to see their costs rise by €50-60 million annually. “This figure is likely to rise as airlines expand operations to more countries in Europe,” said a senior airline official.

This is because from January 1, the legislation to include aviation emissions in the Emissions Trading Scheme (ETS) comes into force. Emissions from aviation currently account for just 2-3 per cent of global greenhouse gas emissions but they are set to grow very rapidly.

EU officials point out the EU-ETS is not a tax, but an emissions ceiling and is one part of the EU's comprehensive approach towards reducing the impact that aviation has on climate change. If an airline can manage to cut its emissions to the expected level, it does not need to incur any costs.

“Including aviation in the EU- ETS will not directly affect or regulate air transport tickets. However, aircraft operators may have to buy emission allowances in the market in addition to those allocated to them. With a carbon price of some €13/tonne and the majority of emissions rights allocated for free to airlines, the average extra cost to airlines will be less than $6 or Rs 260 per passenger on, say, a London – Delhi roundtrip,” EU officials indicated

Gathering support

Meanwhile, at an official level, India has started canvassing with like-minded countries to ensure that the EU-ETS is not imposed. Recently at the Council of International Civil Aviation Organisation (ICAO) in Montreal, India took the lead to organise a strong group of ICAO non-EU council members to join hands to oppose EU-ETS. India's representative to ICAO presented a working paper which was endorsed by 26 non-EU member states including China, Japan, Malaysia, Russia, Korea, Singapore and the US.

In addition, India has already sent a Demarche to EU asking that it should desist from imposing the tax. Meanwhile, airlines can, in the short-term, try to reduce their carbon footprint by buying carbon credits. Officials from the petroleum industry say that there are various methods by which the airlines can cut their bills for buying credits.

“There are a number of agencies which can advise an airline on when to buy the credits, whether buying the entire lot at one time makes good business sense and whether that decision should be taken at the beginning or the end of the year,” said an industry representative.

Jet, Kingfisher and Air India are the three airlines from the Indian side which have regular operations to Europe. British Airways, Virgin Atlantic, BMi, Swiss, Austrian, Lufthansa, KLM and Air France are among the major European airlines which have regular operations to India.

Although the imposition of the tax will affect airlines from both the sides, at the moment it is not very clear as to how these airlines plan to tackle the added cost pressures.

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