by Thomas Biering, Policy Director, A4E
The liberalisation of the EU’s aviation market in the 1990s unleashed intense competition between European airlines which has lowered fares and increased choice. Flying is now for the many, not the few.
The democratisation of air travel in Europe is a major success story that has created economic and social benefits, allowing people to travel freely, visit friends and family abroad, experience new places and cultures and pursue business opportunities. Aviation has facilitated and supported the cross-border ties that are a hallmark of the 21st century, connecting people and ideas.
Demand for air travel is expected to continue to grow in the years to come. This growth must be sustainable. Climate change is one of the defining issues of our time and the environmental impact of transport, especially aviation, is much debated in this context.
European airlines take their responsibility seriously and have invested significantly in becoming more sustainable. Major investment has gone into developing biofuels – the most viable alternative to traditional fuel for planes – which could reduce CO2 emissions by up to 80 per cent once they are ready on a commercial scale. Some airlines are already using a mixture of traditional and renewable fuels on their flights.
For decades, airlines have focused on the most meaningful action they can take: improving fuel efficiency. Aircraft fuel burn per seat has been reduced by 70-80 per cent since the 1960s. The latest aircraft consume 3 liters of fuel per passenger per 100 kilometers, which is more efficient than most passenger cars. Each new generation of planes is on average 15-20 per cent more efficient than the last. In addition, operational efficiencies and new technologies are continuously being implemented.
Progress has been meaningful and has helped to limit emissions. Yet the industry recognises that more needs to be done to reduce aviation’s environmental footprint. However, it is also important to recognise that there are no quick fixes to complex issues.
Direct taxes on aviation have been considered, and in some cases implemented, as measures to address aviation’s climate impact. However, such “green taxes” have limited environmental benefits. A study by the Dutch research institute CE Delft for the Netherlands Ministry of Finance found that a new tax would only have a modest effect on emissions. Analysis by a Committee of Inquiry for the Swedish government came to similar results. Revenues from existing aviation taxes have mainly gone into general government budgets and not been earmarked for environmental initiatives
And such taxes do not come without costs. Aviation is an economic enabler, supporting investment, tourism, trade, and job creation. It directly employs 2 million people in the EU and contributes an estimated €144 billion to GDP. New jobs in the industry generate additional jobs in other sectors, such as logistics and retail, and in the supply chain. As a result, aviation helped to support an estimated 9.4 million jobs and contribute €624 billion to EU GDP in 2016.
Due to strong competition, airlines sometimes choose to absorb these taxes, which affects already low margins. At other times, they may be forced to pass them on to passengers. Ultimately, such taxes increase the cost of travel and reduce connectivity, which harms national economies. That is why some countries have eliminated or reduced aviation taxes, including Austria, Denmark and Ireland.
In this context, it is worth noting that aviation is one of the least subsidised transport modes and pays high costs for the infrastructure it uses, mainly to airports and air navigation service providers. By contrast, the European Environment Agency estimated that in 2015, the annual subsidies granted to road transport amounted to €125 billion and for rail transport up to €73 billion. While air travel is predicted to grow exponentially in the coming decades, it is also worth recalling that it accounts for just 2-3 per cent of global CO2 emissions at present. Road transport still accounts for over 70 per cent of transport emissions in the EU.
However, each industry must do its part. And, in fact, European airlines do pay, albeit indirectly, through the EU’s Emissions Trading Scheme (ETS) since 2012. This has helped to offset some 17 million tons of CO2 emissions per year. The international nature of aviation requires global solutions, however. And that is why the industry worked hard to come up with a comprehensive global scheme to mitigate its climate impact. It is known as CORSIA, it is the first of its kind — and it will come into force from 2021 onwards.
Currently 78 countries have signed up to CORSIA, meaning over 76 per cent of global aviation CO2 emissions will be covered over the life of the scheme – with this number expected to grow as more States join over time.
EU and national governments need to ensure that EU airlines do not face an unfair double burden of adhering to both the EU ETS and CORSIA schemes. They should also support the industry’s own efforts to become more sustainable. Taxes are an easy target with limited climate benefits which do not deal with the core issue: achieving real reductions in CO2 emissions. Providing incentives that reward cleaner aircraft and encourage investments in R&D and innovation are better measures. And it must be recognised that lasting and meaningful solutions requires coordinated contributions from airlines, airports, manufacturers, air traffic management and research institutes. No one will succeed on their own.
Rising to this challenge requires hard choices and clarity about which solutions will work and which will not. We also need to be clear about what we seek to achieve. The answer should not be that fewer people should fly but rather how we achieve climate-neutral flights. “Green taxes” will not help us arrive at that destination.