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EMISSIONS: Airlines Prepare as EU Free Allowances End in 2026

EMISSIONS
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 Airlines such as Lufthansa, EasyJet, and Ryanair are facing significantly higher carbon costs as free EU carbon allowances end in 2026 and starting in 2027, they will be required to pay in full for their intra-Europe emissions, according to Bloomberg BNEF.

  • As a result, Airlines such as Lufthansa, Ryanair, and EasyJet are managing their carbon exposure by using derivatives.
  • This has led Ryanair to lock in forward contracts for its 2025 carbon exposure at €76/t CO2e and 2026 at €57/t CO2e.
  • While Air France-KLM has been purchasing carbon credits to mitigate risks, holding €357.5mn worth as of 31 December 2023.
  • And if CORSIA fails to curb aviation emissions, EU may apply carbon pricing to international flights.
  • Additionally, Lufthansa warns it can't bear rising regulatory costs alone, with CO2 costs for its 2022 intra-Europe flights reaching €530mn, nearly a third of its 2023 net profit.
  • Around 500 aircraft operators have received most allowances for free since 2012, valued at €1.2bn in 2024.
  • Airlines are also exploring innovations like electric, hydrogen aircraft, and carbon capture to limit emissions.
  • EUA DEC 25 up 0.4% at 81.25 EUR/MT
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 Airlines such as Lufthansa, EasyJet, and Ryanair are facing significantly higher carbon costs as free EU carbon allowances end in 2026 and starting in 2027, they will be required to pay in full for their intra-Europe emissions, according to Bloomberg BNEF.

  • As a result, Airlines such as Lufthansa, Ryanair, and EasyJet are managing their carbon exposure by using derivatives.
  • This has led Ryanair to lock in forward contracts for its 2025 carbon exposure at €76/t CO2e and 2026 at €57/t CO2e.
  • While Air France-KLM has been purchasing carbon credits to mitigate risks, holding €357.5mn worth as of 31 December 2023.
  • And if CORSIA fails to curb aviation emissions, EU may apply carbon pricing to international flights.
  • Additionally, Lufthansa warns it can't bear rising regulatory costs alone, with CO2 costs for its 2022 intra-Europe flights reaching €530mn, nearly a third of its 2023 net profit.
  • Around 500 aircraft operators have received most allowances for free since 2012, valued at €1.2bn in 2024.
  • Airlines are also exploring innovations like electric, hydrogen aircraft, and carbon capture to limit emissions.
  • EUA DEC 25 up 0.4% at 81.25 EUR/MT