Including aviation in the second phase of the EU emissions trading scheme is likely to have a relatively modest additional impact on reducing the industry’s contribution to global warming, according to Deloitte research. Robin Pratt, transport economics consulting director at Deloitte says: “Although Aviation emissions trading could help to slow the longer term growth in aviation emissions, variations in the future price of oil are likely to have a far greater impact on fuel consumption and ticket prices than emissions trading.

“Due to the nature of the aviation industry, a trading regime which is not part of an integrated European package of policy proposals, and seeks to stop the longer term growth of aviation emissions entirely, would do significant and unnecessary damage to the industry.

“Fuel market pressures should continue to influence aircraft and engines to become more fuel-efficient, but the growing demand for air travel is still likely to carry on driving up aviation emissions.”

Deloitte estimates suggest that, even with aviation demand becoming increasingly price sensitive, post-tax fuel prices would need to rise by 16% to achieve the same emissions outcomes by 2012 as a trading scheme. “This is not to say that aviation fuel taxes should be ruled out as a policy instrument when coupled with a trading scheme. Fuel taxes can provide the public sector with an additional source of ongoing revenue to fund initiatives such as research activities, which could benefit the industry,” adds Pratt.

Following the implementation of the existing European emissions trading scheme on April 22, the UK Government intends to support the introduction of aviation emissions trading in 2008 during the second phase of the EU scheme. However, concrete proposals for a world-wide trading scheme are yet to emerge.

“It is vital that, if aviation is to be included in future phases of the EU emissions trading scheme, the details are finalised well beforehand to allow the industry to plan for it efficiently,” says Pratt.

Ends

Notes to editors
The UK Government committed itself to making the inclusion of aviation in Phase 2 of the EU’s Emissions Trading Scheme (EU ETS) a priority during its EU Presidency. Phase 1 has already started and runs to the end of 2007. Phase 2 is timed from 2008 to 2012, in line with Kyoto commitments for reducing Greenhouse Gases (GHGs).

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.