Deutsche Lufthansa AG, Europe’s second largest airline, says it start trading EU carbon permits on the European Energy Exchange AG. The exchange is the world’s largest greenhouse gas cap-and-trade program.
It’s the first airline to trade carbon emission rights, but all airlines will be required to join next year. The industry will be the second largest on the exchange, after utilities.
The E.U. Emissions Trading System requires that companies which go beyond their carbon quotas buy permits for the excess from businesses that emit less. The other option is to pay fines. The exchange currently hosts over 11,000 utilities and manufacturers.
Proceeds from the exchange are distributed to member states, which use the revenues to address climate change.
The airline industry – all flights that originate or end in Europe – was included by law in the exchange because their emissions doubled over the past 20 years. At this point, 82% of emission permits are handed out free, 15% are auctioned, and 3% go into a reserve to be distributed to new or rapidly growing airlines.
When airlines join the exchange, the group will have an upper limit of 213 million metric tons of carbon; it drops to 208.5 million tons in 2013.
Airfare prices could rise a tiny amount – from EUR1.80 to EUR 9.
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