The European Union (EU) is seeking to impose higher costs on carbon-intensive industries for their pollution, and this could result in an increase of up to €10 per return flight. EU lawmakers have given their preliminary approval to an update of the EU's carbon pricing regulations, which requires industries, including aviation, to purchase sufficient allowances to cover their emissions under the emissions trading system.
According to industry experts, the EU's new regulations will put an end to the current system of allowing airlines to acquire a substantial portion of their required permits for free by 2026. The total number of available allowances in the system will decrease over time, which is expected to drive up the cost of emitting pollution.
Olivier Jankovec, the director-general of ACI Europe, which represents the airport industry, stated at an industry conference that the EU is undergoing a major shift in policy that will change the financial landscape of the sector. He added it would result in higher costs for airlines, higher ticket prices, and lower demand.
According to Ryanair CEO Michael O'Leary, the days of incredibly low airfares may be coming to an end due to increasing environmental taxes and the rising cost of oil. A recent estimate by Bernstein analyst Alex Irving suggests that the expenses associated with complying with the EU Emissions Trading Scheme (ETS) will increase from €0.5 billion in 2019 to €5 billion in 2027 for the six largest airlines operating within the EU.
Irving believes that airlines will have no choice but to pass these additional costs on to passengers in the form of higher ticket prices of up to €8 to €10 per return flight.
