LONDON (Reuters Breakingviews) – Europe’s airlines are flying into a carbon cloud. New European Commission boss Ursula von der Leyen’s continental Green New Deal puts the sector firmly in the cross hairs. Her most obvious ammunition is removing the free rides airlines get from fuel tax and emissions credits. A bigger threat to the industry, though, comes from Greta Thunberg.
Airlines currently account for less than 3% of CO2 output globally, but this will climb as air traffic grows and power stations and cars switch to renewables. Unlike other sectors, functional green alternatives like bio-jet fuel or electric planes are years, possibly decades, away. Until then, airline bosses have carbon offsetting – basically paying for projects like tree-planting to suck up CO2 – as their sole defence against regulators and teenage Swedish activists.
Budget carrier easyJet’s pledge to spend 25 million pounds on annual offsets is a case in point. But that’s unlikely to spike von der Leyen’s green guns. Her easiest riposte would be to make airlines pay jet-fuel duty. Assuming regulators used the existing commercial levy, that would add 21 euros to every 1,000 litres of fuel, a roughly 5% increase. Another would be to ditch the free credits airlines get for Europe’s carbon-trading regime. At the current 24.6 euros per tonne of CO2, that’s worth 114 million euros to Ryanair, 12% of 2020 forecast operating profit.