Emission trading scheme - a license to print money

Sorry to go all Daily Mail on y'all, but you really couldn't make it up. The emissions trading scheme, the Government's preferred method of reducing aviation's contribution to climate change, is likely to generate up to £4 billion in windfall profits for the industry.

A report commissioned for the DfT and Defra into the effects of the ETS, reveals how the scheme will reward airlines with too many free credits, which will then be sold on by industry. The airlines are expected to use the spectre of the trading scheme to raise their own prices, charging customers for the emissions generated by their flight - despite recieving 96-97% of their current emissions in free credits.

When the energy industry entered the scheme, it too was given almost all its current emissions in free credits. It netted £1 billion in windfall profits, passing the cost of buying new credits onto consumers. The report predicts that the same will happen when aviation enters the scheme, if the number of free credits is not dramatically reduced - and WWF believe that this could net the airlines up to £4 billion.

Robin Smale, the economist who wrote the report, said: "The airlines are going to be in the same position as the electricity generators in making windfall profits from a scheme designed to benefit the environment. It could run to billions of pounds and it will be embarrassing for the Government and the industry."

Launching the third runway consultation, Ruth Kelly insisted that the ETS would enable the expansion of Heathrow with no overall increase in emissions. That claim now lies in tatters - unless the EU radically overhauls the current scheme - as "a high level of free allocation will generate windfall profits" for industry.

Indeed, the process of giving free credits based on current emissions gives industry no incentive to reduce their emissions. Companies which reduce their emissions prior to the scheme are only going to recieve less free credits than more polluting airlines - hardly a good reason to pollute less.

Of course the industry doesn't quite agree. A spokesman for British Airways said "Industries in the current scheme were allocated permits based on their previous emissions levels and at no cost to them. Aviation should be treated consistently with existing sectors in the scheme."

Of course, I'd say that too if I was in line for a big slice of a £4 billion greenwash pie...