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Airlines may earn as much as 1.3 billion euros ($1.7 billion) after they passed onto customers the costs of European pollution curbs and won a freeze on their carbon trading obligations, a report showed.

Carriers may cash in between 436 million and 872 million euros after they raised ticket prices following their inclusion in the European Union emission trading system last year, environmental research institute CE Delft said in the report. The windfall gains may rise by further 243 million to 486 million euros after the EU proposed to temporarily exempt from its carbon system flights into and out of the region, according to the report.

“Passengers have paid toward fighting climate change, it is unjust for airlines to retain these windfall profits,” said Bill Hemmings, aviation manager at lobby group Transport & Environment, which commissioned the report.

The 27-nation EU decided to include aviation in its emissions trading system from 2012 after airline discharges in the region doubled over two decades. The expansion of the European cap-and-trade program abroad triggered opposition from countries including the U.S., China and Russia, which argued the United Nations’ aviation panel is the forum to tackle emissions from the industry.

While the proposed exemption for foreign flights is due to be officially adopted by European governments later this year, airlines will have to comply with the pollution limits on routes within Europe. The EU wants to lead the fight against climate change and is pushing for a global deal to cut pollution from airlines.

“Air carriers should act responsibly and contribute these additional profits to the UN’s Green Climate Fund, created to support developing countries’ initiatives to tackle the impacts of climate change,” Hemmings said in an e-mailed statement.
Bloomberg, January 22, 2013