Fasten your seatbelt: Airlines and cap-and-trade

Potential consequences of climate change regulation including cap-and-trade on the financial performance of the airline industry.

Publication date: December 2009
Information in this report was correct at the time of publication


Publication date: 07/12/2009

Civil aviation is one of the fastest growing sources of greenhouse gas emissions, showing long term compound annual growth rates of emissions of 3-4%. A key policy objective will be to ensure airline emissions return to 2005 levels by 2050.

This report aims to give mainstream institutional investors and their advisors a briefing on the potential consequences of climate change regulation on the financial performance of the airline industry. It focuses in particular on the sensitivity of airline industry profits on entry to a cap-and-trade scheme, and uses example scenarios that could apply when aircraft operators (including large airlines) enter the European Union Emissions Trading System (EU ETS).

Through this briefing, we hope to stimulate institutional investors and their advisors to carry out their own analysis of the implications of climate change regulation on airlines - in particular the EU ETS - but also other emerging schemes in other regions.

We also hope to stimulate investors to engage with airlines to hold their management to account on the development of far-sighted strategies to reduce their overall emissions and to engage with policy makers to ensure an efficient policy framework which both succeeds in combating climate change and preserves and creates shareholder value.


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