Airlines Are Allocated by Carbon Permits in EU
Air travel accounts for perhaps 3 to 5% of global carbon dioxide emissions, far below sources like deforestation, coal-fired electricity and automobiles. It is really no immediate alternative to carbon-intensive jet fuel. Airlines have experimented with biofuel mixes, but they’re still a long way from regular use.
Starting 2012, the E.U. set to extend its Emissions Trading System to the air travel industry, which means that airlines would need to account for the carbon emitted for the entirety of any flight that takes off from or lands at any airport in Europe. Airlines would be allocated carbon permits—most of which would be free initially—but would have to buy additional credits on the carbon market if their emissions exceed those allowances. It would be the first meaningful attempt to constrain the carbon emissions from air travel.
The EU is also looking at ways to regulate the carbon output of international shipping. Proposals to curb greenhouse gas emissions from aviation and shipping have been under discussion since the negotiations leading up to the Kyoto protocol in 1997, and in recent years have focused on a levy on shipping. But that proposal was knocked back yet again at this month’s UN climate negotiations in Durban, South Africa. Emissions from international aviation and maritime transport are excluded from the Kyoto protocol and the 2009 Copenhagen accord, and there is no guarantee they will be included in any new international climate agreement to come into force from 2020. If aviation is included in the EU emissions trading scheme, it will be the first time carbon emissions from the sector have been regulated.
While the industry has said the new rules could cost billions—money that you can bet will be passed to passengers. The European Commission estimates that the price per passenger would range from $1.40 to $8.60 per ticket, depending on the length of the flight. From this prospective, this method can not limit the emission to an ideal level, because the cost can be transferred to customers by high ticket price. The emission could be deducted by a relatively small number.
In my opinion, the carbon permits function as quota, which can limit the emission at a point that can maximize the social benefits. If the emission exceeds the allowances, they have to pay cost to buy the additional credits. The cost shifts down the supply curve, suppressing the supply. The cost can be used to deal with environmental problems. It is effective to reduce the use of traditional jet fuels by find an environmental friendly alternatives.
http://www.guardian.co.uk/environment/2011/dec/20/eu-charge-airlines-carbon-emissions?newsfeed=true