Oh the irony. Airlines stand to make billions of pounds in “windfall profits” from an emissions trading scheme that was supposed to make them pay for the environmental damage they cause.

A UK government report argues the airlines will take advantage of the scheme to raise fares substantially, even though their costs will hardly change.

The report, commissioned by the Department for Transport and the Department for Environment, Food and Rural Affairs, says that the airlines will raise fares by the full value of the permits even though they will pay nothing for them. It concludes: “The consequence of the results set out here is that a high level of free allocation will generate windfall profits.”

It recommends that airlines be forced to buy a substantial proportion of the permits needed to cover their present emissions. 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.”

Another government mess….