Europe’s emissions strategy reverts to new taxes on airlines

by ASSOCIATE EDITOR AND CHIEF CORRESPONDENT, TOM BALLANTYNE  

August 1st 2021

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The European Union (EU) is at it again. Read More » In the middle of the COVID-19 pandemic and the worst crisis airlines have experienced in the history of flying, EU legislators are proposing new taxes on aviation fuel and regulations that will force carriers flying in European skies to use increasing amounts of sustainable aviation fuel (SAF).

Airline industry bodies are dismayed by the EU’s plans, angrily pointing out the last problem their members need now is additional fees on bottom lines that have been decimated by the pandemic, not to mention the debt they have accumulated and will have to repay for at least a decade to come.

The policy recommendations are part of a sweeping set of proposals put forward by the European Commission aimed at reducing the EU’s net greenhouse gas emissions by at least 55% by 2030.

Under the ReFuelEU Aviation Initiative, fuel suppliers will be obligated to blend increasing levels of SAF (sustainable aviation fuel) in the jet fuel delivered to EU airports. That number will rise from 5% in 2030 to 20% in 2035 and ultimately to 63% by 2050. A minimum tax for polluting fuels is to be introduced gradually over a decade, starting in 2023.

The EU wants to make sure carriers flying through Europe, including Asia-Pacific airlines, don’t dodge the regulation by fuelling up outside the EU to avoid the new taxes or the SAF regulation. Instead, they will have to fuel-up consistently during aircraft turns within the EU so they cannot avoid fueling at airports with SAF, where the fuel price is expected to be higher.

For airlines the issue is that SAF is far more expensive than normal jet fuel and the infrastructure required to meet global aviation fuel requirements is decades away. “Taxes are unhelpful and usually harmful to consumers. It will be more productive if governments support and incentivize the accelerated development and deployment of sustainable aviation fuels on a cost-effective basis,” said Association of Asia Pacific Airlines (AAPA) director general, Subhas Menon. “All parts of the aviation ecosystem, including fuel suppliers, need to come together to overcome this significant challenge which is beyond the airlines to address on their own.”

The International Air Transport Association (IATA) reacted strongly to the proposed EU SAF regulations condemning them as counterproductive to the goal of sustainable aviation. “Aviation is committed to decarbonization as a global industry. We don’t need persuading or punitive measures like taxes, to motivate change,” said IATA director general, Willie Walsh. “In fact, taxes siphon money from the industry that could support emissions reducing investments in fleet renewal and clean technologies.” A better approach would be tax incentives to spur SAF production, Walsh said.

IATA’s data on SAF in aviation underscores the challenge ahead. While SAF reduce emissions by up to 80% compared to traditional jet fuel, insufficient supply and high prices have limited airline uptake to 120 million litres in 2021, a fraction of the 350 billion litres airlines consume in a ‘normal’ year.

What is required are market-based measures to manage emissions until technology solutions are fully developed, IATA said. “The industry supports the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as a global measure for all of international aviation. It avoids creating a patchwork of uncoordinated national or regional measures such as the EU Emissions Trading Scheme, that can undermine international cooperation,” the global airline body said.

“Overlapping schemes can lead to the same emissions being paid for more than once. IATA is extremely concerned by the Commission’s proposal that European States would no longer implement CORSIA on all international flights.”

“Modernizing European ATM through the Single European Sky initiative would cut Europe’s aviation emissions between 6%-10%, but national governments continue to delay implementation,” IATA said.

“Just recently the European Council failed to show any leadership in cutting emissions through harmonizing European air traffic management,” Walsh said.

“The most practical near-term solution to reducing emissions is SAF. But energy transitions are only successful when production incentives drive down the price of alternative fuels while driving supplies up. Making jet fuel more expensive through taxation scores an ‘own goal’ on competitiveness that does little to accelerate the commercialization of SAF.”