Pressure on UK as Germany backs end of free carbon permits for airlines | Airline industry


German government backs extension of EU carbon pricing that will end free carbon permits for airlines, pressuring UK to put in place a similar package to meet climate targets .

The European Commission will propose a dozen climate policies on July 14, each designed to reduce greenhouse gases more quickly in line with the EU’s target of reducing net emissions by 55% by 2030 from levels from 1990.

The package will include reforms to the EU’s carbon market and a border tax to impose CO2 costs on imported goods. All policies will need to be approved by EU governments and the European Parliament.

Boris Johnson has pledged to give details on how the UK will meet climate targets ahead of the Cop26 conference in Glasgow this year.

Ministers fear that the costs of the transitional arrangements for reduce emissions by 78% by 2035 will dramatically increase the cost of fuel for transportation, including flights, which could spark protests and a backbench rebellion by Conservative MPs.

According to a document viewed by Reuters, Germany supported the commission’s plan to impose CO2 prices on transport and heating in buildings through a system separate from the EU’s existing carbon market.

“The long-term goal should be to have a uniform cross-sector carbon price across the EU,” the document said.

The carbon market forces factories, power plants and airlines to buy permits when they pollute in the EU. Industry and airlines are getting it for free, shielding them from carbon prices that have reached record highs this year.

The UK has created its own carbon pricing market since leaving the EU, but it mainly follows the existing European model and focuses on heavy industries and energy providers.

Critics of carbon pricing say it has done little to cut emissions after collapsing prices over the past 10 years and overuse of free permits, allowing companies to use energy at little additional cost. The price has risen sharply recently as economies have started to recover from the pandemic, approaching caps imposed by the EU and UK.

Berlin imposed a national CO2 tax on heating and transport fuel suppliers this year, set at an initial amount of € 25 (£ 21.50) per tonne. However, plans to reform the EU-wide system and impose higher costs on heavy carbon users is being pushed back by some European governments and lawmakers, who fear it will translate into higher bills. household fuel.

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Brussels is under pressure to come up with a compensation system to ensure that governments have sufficient resources to deal with the social impact of the policy – especially on low-income households and people who rent out their homes, Germany said.

The UK government will face the same dilemma if it imposes the cost of carbon emissions on consumers, many of whom have low incomes and are already struggling to pay their heating bills.

Berlin said EU carbon market reforms should extend free carbon permits “to an appropriate extent,” but end them soon for aviation, according to the document.

Analysts have said that to comply with World Trade Organization rules, the EU must phase out free permits when it introduces a border carbon tax on imported goods.

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