Airline griping over EU aviation carbon tax isn’t about the consumer
Here’s my take on the EU aviation carbon tax that is causing a stink with major world airline carriers:
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Tyler Hamilton
My family flew to North Carolina during the holiday to visit relatives and, being aware of new baggage fees, we made every effort to pack lightly.
Of two adults and two children we had only one item to check in. Not bad. But it still meant paying $25 to get the bag to Charlotte and another $25 to get it back home. Had we each checked just one bag for our one-week trip, it would have cost the family $200.
I point this out because I’m perplexed by Air Canada’s strong opposition to the European Union’s new aviation carbon tax, which went into effect Jan. 1.
The airline — as well as other members of the National Airlines Council of Canada — has no problem arbitrarily adding $50 to the price of a 2,500-kilometre round trip to the United States.
But it won’t tolerate the European Union slapping on a carbon tax that would only add $1.45 to a $500 round-trip ticket between Toronto and Frankfurt, Germany, a journey that covers five times the distance.
How did I come to $1.45? Anyone can calculate the impact on any trip to Europe. Just go to the website of the International Civil Aviation Organization at and click on the carbon calculator link at the bottom-left of the screen. Or click here.
A round trip between Toronto and Frankfurt generates 922 kilograms of carbon emissions per person. Per tonne, the price of carbon emissions on the European market is about $10.50, so the price for 922 kilograms would be $9.68.
But that’s not what airlines would initially have to pay per passenger. Under the new European aviation tax scheme, airlines still get a free pass for 85 per cent of their emissions. With the tax only applying to the remaining 15 per cent, that works out to $1.45 that will surely be passed along to consumers.
As industry observer Bill Hemmings said, “Commercially it’s a non-event.” Airlines arbitrarily change online flight prices on a minute-by-minute basis by much larger amounts.
Yet Air Canada and its fellow airlines in Canada, the United States, China, India, Russia and Japan insist on demonizing the fee and amplifying talk of trade wars and unproven claims of job destruction. It doesn’t matter that the European Union Court of Justice ruled recently that the new tax does not contravene international law.
“This ruling by no means settles this matter,” George Petsikas, president of Canada’s airline council, said defiantly after the European court ruling.
Those opposed to the EU’s actions argue that the matter of emissions reductions in the global aviation industry is best addressed through a “coherent, multilateral framework” via the International Civil Aviation Organization (ICAO).
The solution, they feel, is to create yet another international initiative that likely will lead to more delay and inaction on pressing climate matters.
Been there, done that. What’s admirable about the EU approach is that it’s about more action and less talk. Understandably, it’s tired of waiting for the rest of the world to get its act together.
The aviation sector accounts for 3 per cent of global emissions, but both its share of global emissions and its absolute contribution are expected to grow under a do-nothing scenario that isn’t sustainable.
To be fair, the industry hasn’t been idle. Fuel efficiency has improved by 16 per cent between 2001 and 2008, according to the International Air Transport Association. Since 1990, major Canadian airlines have improved fuel efficiency by 31 per cent.
But it’s not enough, and there’s a whole lot more that can be done. A sector-specific carbon tax that grows gradually and includes more countries over time will accelerate innovation and give the most fuel-efficient airlines an edge over competitors.
As airline fleets are renewed there will be greater incentive to embrace more efficient engine technology and light-weight materials, such as carbon fibre, in the design of new aircraft.
The air transport association estimates the industry will spend $1.5 trillion on new aircraft by 2020, resulting in more than a quarter of the global fleet being replaced. It’s important to make sure new aircraft are built and purchased with fuel-efficiency top of mind.
Airlines will also be more motivated to use renewable jet fuel products in old and new aircraft to offset their carbon footprints. There’s tremendous promise with respect to carbon-neutral jet fuels derived from algae, wood waste, inedible plants such as camelina, and even industrial waste gases.
One advantage is that aviation is a relatively easy market to target. There are fewer than 2,000 airports around the world that serve as major fuelling hubs for airplanes, so the required infrastructure changes to accommodate renewable jet fuel are quite manageable. Contrast this with the hundreds of thousands of fuelling stations that service cars worldwide.
Jet fuel also represents less than 8 per cent of global demand for oil products, so it’s not as daunting as tackling the market for consumer vehicles, which consume more than 40 per cent of oil supply.
The industry says it is already going down this innovation path. That only makes the EU carbon tax even more benign. The EU, meanwhile, has said that any airline headquartered in a country with similar emission-reduction policies would be exempt from the EU tax.
So what, exactly, is the fuss all about? It’s about the rest of the world not liking Europe taking the lead and telling it what to do, and even though it’s clear that we need to do it.
It certainly isn’t about the financial interests of travellers, who have been and will continue to be penalized much more by arbitrary fees designed to pad the bottom line.
Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies. tyler@cleanbreak.ca
Tags: Air Canada, airlines, carbon tax, EU
Tyler Hamilton is associate publisher and editor-in-chief of Corporate Knights magazine and former business columnist for the Toronto Star. This blog is a personal project started in April 2005.
January 15th, 2012 at 8:38 am
Tyler, I think you have raised a very pertinent issue. I do not understand why any airline would not want to make itself more attractive to customers by becoming more sustainable, resource efficient, and more cost effective to attract more customers. Having a smaller impact on the environment, and being lean and green throughout your business chain will generate more business and profits. I would have thought the more innovative, creative and responsible airlines would see the EU ETS charges as an opportunity rather than a threat. What an incentive to generate Triple Bottom Line business benefits across their whole operations and become part of the People, Planet, Profits sustainable economy! Looking at their whole operations (air and ground) as well as the biofuel issue could bring $bns of through-life savings and be fantastic for their CSR and PR image? No brainer really.
On the ‘charge for extra baggage and volume/weight’ angle, if charging for extra baggage is a fuel/emissions issue, why don’t airlines give refunds to those with less than the average baggage allowance or allow passengers to ‘trade’ their allowances? Seems rather hypocritical and one-sided to charge for extra weight and volume but not give credit the other way – lose lose for the passengers yet again?
January 15th, 2012 at 1:57 pm
I can’t speak for our good neighbors to the North or our friends living in Europe but most Americans do not trust any Cap and Trade or trading program managed by any government regardless of which country it comes from. A trading program conducted in the Eastern part of the U.S. DID achieve [and exceeded] their targeted [NO] reductions but that initiative has been falling apart by the withdrawal of some states from the agreement. The State of California passed legislation implementing a Cap & Trade program in 2011 and it is currently under attack by various different organizations. So the question becomes; WHY has the Congress of the United States be unable to get any type of carbon agreement passed in America?
There are SIGNIFICANT cultural differences between Canada, Europe and the United States. Most [over 80%] of the American people do not trust their governments ability to manage ANYTHING. Additionally for over 200 years the American people have fought to control the size and power of their government. Is it any wonder that there is RESISTANCE to programs like Cap & Trade or some other type of carbon reduction plans by the people? And probably the biggest difference is that most American’s do not want anything to do with any type of “world government” or ‘world agreements’. This to many Americans is the culture they know.
In summary, the American people do not trust their government or any other government. They do not believe government can solve anything and a world government might be the most evil of all. It really doesn’t make any difference if the carbon reduction plan raises airfares $4.00 or $40.00 – the culture in American makes people THINK – just who are these people and what gives them the right to dictate something. Are you beginning to see why Cap & Trade initiatives have failed in America.
I have been against Cap & Trade programs for years. I have also SUPPORTED Feed-In-Tariffs and a TAX on carbon because those are the most direct approach to carbon reduction. I also support renewable energy projects, hybrid and Electric Vehicles and promote clean air and water initiatives. I do believe that something is warming our planet however I am not sure it is being caused by CO2. I also believe the term ‘global warming’ is a USELESS term outside of the scientific community. I can sell someone a 4 kW solar PV system for their home but I CAN’T sell then ‘global warming’. Global warming is NOT a product or service; you can’t buy it, sell it, save it, plant it in the ground and watch it grow or eat it. A word of advice; if you want more people to support some type of effort in this area – promote a different term that is more meaningful and people will get on board.
The United States WILL; by it’s own methods; meet carbon reduction goals WITHOUT interference from some other country or foreign government. These are my views based on my 72 years of life experiences. I welcome the opinions of others.
January 16th, 2012 at 11:16 am
Your post actually seems to make a pretty good point against this tax. It sounds like the purpose of the tax is to drive change in the industry, but if the tax is so small that it will not impact consumer decisions, and airlines are already becoming more efficient to cope with high fuel prices, then how much additional innovation and adoption is the tax likely to drive? And if it’s not actually going to be a driver of change, isn’t the airline industry being unfairly singled out because it’s an easy target? I can see how the airlines would have a problem with that kind of treatment.
January 16th, 2012 at 4:13 pm
On January 15, 2012 I posted a blog entry about the cultural differences between the United States and some other countries. But there is much more to this story than what I posted on that date and here is another example in response to a quote from this story.
“The aviation sector accounts for 3 per cent of global emissions…”.
When I was in college [a very long time ago, LOL] statistics was a required course for individuals studying for an engineering degree and that requirement still exists today. In that course engineering students are taught the Pareto Principle or the meaning of the ‘significant few’. Over the years the Pareto Principle has been called many things. Like, ‘working on the low hanging fruit’ or work first on the ‘significant items first’.
So the question in my mind becomes; is the 3% contribution of the aviation industry one of the ‘significant few’ or ‘low hanging fruits’ we should be working on? I don’t think so. If an industry is improving on its own; is more government intervention or regulation the best approach? That seems to say; no matter what you do; we are going to tax you.
Here are just a couple of areas that I believe are MORE significant. Improvements in these areas could make significant contributions to our goal of becoming a less carbon intensive society. Please note; these numbers vary considerably depending on who and what you read.
1. Fossil fuel used for generation [coal electricity] = 40%
2. Transportation sector [car/truck/bus/etc] = 33%
So are we working on one of the ‘significant few’ or on a ‘low hanging’ fruits? I don’t think so. It seems to me that the EU might just have shot itself in the foot so to speak. It is possible that it could find itself quite lonely when it tries to force Cap & Trade on the rest of the world.
What do you think? Opposing views are always welcomed.
January 17th, 2012 at 9:32 am
Excellent analysis Jay. I agree.