Airlines to embrace carbon market, not taxes

LONDON, Dec 20 (Reuters) Airlines will embrace plans by Brussels, to be unveiled on Wednesday, to include the sector in the European Union's carbon trading scheme, preferring this to a tax on passengers, flights or fuel.

But carriers are still bickering over the scope of the plans -- whether these should cover all flights or just those inside Europe -- possibly setting up years of legal disputes.

Aviation contributes to less than 2 percent of global greenhouse gas emissions currently, but the sector is growing rapidly, with emissions nearly doubling between 1990 and 2004 according to the European Environment Agency.

Pressure is building to curb greenhouse gas emissions as scientists say evidence for global warming is mounting.

Many airlines are keen to be included in a carbon trading scheme which may have a lesser impact on their bottom line than taxes, and could even raise profits.

''We're calling for this tougher and sooner,'' said Toby Nicol, spokesman for easyJet. ''In the meantime we're getting nonsense airline taxes.'' British finance minister Gordon Brown doubled taxes on air passengers two weeks ago, in a move which some UK carriers say imposes charges more than four times the cost of simply buying permits and so offsetting emissions.

Brussels is expected to announce on Wednesday plans to include just intra-EU flights in its carbon trading scheme in 2011, and all flights into and out of Europe from 2012.

But airlines with wide networks like British Airways want just European flights included, saying this will avoid legal protests from non-European airlines.

''If you try to apply this to all carriers wherever they're based there's all kinds of jurisdictional issues,'' said Paul Marston, spokesman for British Airways. ''That just means there'll be big delays.'' Low fare airlines like easyJet which fly predominantly within Europe want all international flights covered, fearing that otherwise they will bear a bigger burden of costs per flight.

''For us it's either everybody or nobody,'' said Nicol.

WINDFALL PROFITS By inclusion in the European carbon trading scheme -- the EU's key thrust against climate change -- airlines would get a certain stock of permits to emit greenhouse gases but have to buy any extra if they exceed that cap.

They could make big profits from the scheme if they passed on to consumers the cost of permits which they get for free, as power companies have done under the scheme, now two years old.

''It would be perverse if the first attempt to curb aviation emissions ended up giving the sector huge windfall profits,'' said environmental group WWF's Keith Allott.

Some industry is resisting a simple solution -- to auction permits rather than give them away free.

''I would include (aviation) in the emissions trading scheme and auction 100 percent (of permits), and direct those funds into research, development and deployment,'' said Michael Rea, Director of strategy at the Carbon Trust, which spearheads Britain's drive to a low-carbon economy.

''Whether you like it or not aviation is a consumer need.

What's important is to incentivise aircraft manufacturers and operators to innovate.'' REUTERS SBA HS1940