Airlines for Europe (A4E), Europe’s largest airline association, this week sharply criticized a statement issued by EU Finance Ministers requesting EU coordination on aviation pricing, pointing out its flaws and underlining that aviation taxation will not reduce CO2 emissions.
“Aviation transport connects people worldwide and is important for economic growth. At the same time, aviation has a significant impact on the environment: it causes approximately 2.5% of global CO2-emissions and it causes negative externalities, such as noise and air pollution.”
The opening lines of the joint statement issued on 07 NOV 19 and signed by the EU Finance Ministers of Belgium, Bulgaria, Denmark, France, Germany, Italy, Luxembourg, The Netherlands, and Sweden, call upon the incoming European Commission to motion a debate on aviation pricing. They propose aviation taxation, supporting their argument with: “Compared to most other means of transportation, aviation is not sufficiently priced. Aviation transport is exempted from excise duties, no VAT is levied on international flights, there is no coordinated ticket tax and economic instruments to curb greenhouse gas emissions can be strengthened in the aviation sector. Therefore, CO2-emissions and negative externalities are on average not sufficiently covered in the price of international airplane tickets.”
The signatories feel that more orchestrated pricing management “could ensure that the polluter pays a fairer price for the use of aviation transport. To be effective and create a level playing field, we are convinced that EU coordination on this matter is the most effective for all member states.”
How level is the playing field really, given that international air travel extends beyond the EU and that, within the EU, air travel is just a fraction of the problem?
This comparison is exactly the crux of the issue. A4E criticizes that “Unilateral national taxation measures such as those introduced by France and Germany are short-sighted and particularly harmful to a level playing field,” and points to the mistake in comparing the aviation industry with other modes of transportation: “Unlike road transport or railways -- which receive a significant amount of government subsidies -- the aviation industry pays for the majority of its infrastructure costs – on top of paying for the majority of its security costs.”
It goes on to cite IATA estimates of €31 billion paid by airlines in 2017 for the use of airport infrastructure in Europe in 2017 and, more importantly, points out that European aviation has already been paying for its emissions in Europe since 2012 via the EU Emissions Trading System (ETS). “The price of emission allowances has tripled since 2018. The EU ETS is, in fact already a coordinated economic instrument for aviation carbon pricing” - A fact completely ignored in the Ministers’ recent statement. A4E also draws attention to the aviation share of all transport modes, citing “An European Commission study from June 2019 also showed that the external societal costs of various transport modes were 1.8% for rail, 5% for aviation, 10% for maritime and 83% for road transport. Similarly, CO2 emissions from aviation are dwarfed by emissions from road transport at both EU and global levels.”
EU airlines already paying for their CO2 emissions since 2012
Thomas Reynaert, Managing Director of Airlines for Europe (A4E), stressed “It is simply inaccurate to claim that aviation is not taxed at all or that is insufficiently priced. In 2018 alone, European airlines paid more than €5 billion in ETS and environmental taxes. The maritime sector, for example, is also exempt from excise duties -- and 21 EU Member States grant rail operators a VAT exemption for cross-border travel.” Long-term measures are required to enable sustainable growth for the European aviation industry which currently supports 9.4 million jobs and contributes €615 billion in EU GDP3 (4.2% of total). The geographical layout of the European continent means that those living on islands and in countries at Europe’s periphery are reliant on air travel, so A4E’s priority is ensure that aviation brings social and economic value to European citizens. The A4E paper discloses that 80% of emissions comes from journeys of over 1,500 kms, thus: “Aviation needs a global solution to a global issue. It is the only industry to have a globally agreed mechanism to tackle carbon emissions (CORSIA), which begins in 2021.”
U.N. global carbon mitigation scheme, CORSIA, due to take off in 2021
A4E point out that the aviation industry’s commitment to reducing carbon emissions is illustrated by the fact that it has already halved its per-flight carbon footprint over the past 30 years, and that the A4E members are investing €169 billion over the next ten years in new aircraft technologies and sustainable aviation fuels. “These are meaningful long-term solutions which can reduce CO2 emissions by up to 80%.”
While CORSIA will be instrumental in airlines financing climate mitigation projects across the world, such as these investments in cleaner aviation technology, new generation aircraft, engines, and sustainable fuels, A4E calls into question how aviation taxes would benefit the environment if the monies levied are not invested in the same way. On the contrary, taxes within Europe would cripple its regions in an already tough, competitive, aviation market.
If the EU is looking to advance decarbonization, then it would do better to support the aviation industry in finding alternatives to fossil fuels, by providing incentives to accelerate investment in new technologies. Reynaert’s counter-request to the Ministers’ joint statement, is: “At this critical juncture, the EU must focus on supporting our efforts to decarbonize and implement effective measures rather than resorting to symbolic gestures such as taxes, which do not have a material impact on carbon reduction. We need a much higher production of sustainable aviation fuels in the coming decades. These fuels, which already exist, could reduce emissions from flying by up to 80%. Last but not least, EU Member States could also do their share by implementing the long overdue Single European Sky, which could reduce aviation emissions in Europe by up to 10 per cent.”
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