European airlines face big hit as cost of polluting soars

A sharp rise in the cost of polluting in Europe risks undermining airlines’ efforts to repair their balance sheets following the damage caused by Covid-19. The cost of purchasing carbon allowances under the EU’s emissions trading system, ETS, has been on a record breaking rally, with prices more than doubling to above E50 a tonne compared with pre-pandemic levels. That presents a problem for airlines in the region, which like other carbon intensive sectors must buy the tradable credits to cover the amount they pollute under parallel emissions systems in both the UK and the EU. The nascent UK system, which launched this month, started trading at higher prices, of above GBP50 a tonne. Low-cost carriers including Ryanair, easyJet and Wizz Air have been hit particularly hard as the schemes only cover emissions on flights in Europe and the UK where they do nearly all their flying. “There’s no getting away from the fact that the carbon price is going through the roof and these guys are exposed to that,” said Deutsche Bank analyst Jaime Rowbotham. Disclosure around emissions trading and hedging strategies are patchy, but Rowbotham estimates Ryanair, easyJet and Wizz will between them pay more than E600m in carbon costs in their 2023 financial years, up from about E330m before the crisis hit. Story has much more detail.<br/>