Around the world Friday there are climate strikes and climate protests and climate concerns. So, inevitably, governments know that they have to Do Something. The United Nations is convening a Summit next week. You know it is important if we have to have a Summit. But for the protestors, that is not enough of a Something to be Done. For better or worse, aviation seems to have attracted a lot of attention. Around Europe, for example, it has become fashionable to avoid flying, to avoid flygskam, the Swedish word for shame of flying, coined by Greta Thunburg, a 16-year-old who seems able to wrong-foot entire governments and the entire aviation industry as well.
I wrote recently about an extraordinary meeting of European finance ministries in The Hague. Ostensibly, perhaps even at its core, the meeting tried to focus on decarbonization of aviation. That is of course the right approach for governments. It does not try to ban flying, or to deny its economic and social benefits, but simply to ask it to play its part in reducing emissions, like all other sectors are being required to do. But one of aviation’s secrets is that it is very lightly taxed. Fuel for international services is generally tax free. The screams you hear from the airline sector about just how very taxed it is – it’s a smokescreen. In the U.S., airlines do not directly pay for the FAA’s air traffic services, for example. The cost is collected as a ‘tax’ on passengers. Many airport services are in the same category.
In Europe, the airlines like to complain that they are required to comply with the European Emission Trading Scheme, too, but the regulators like to point out that the ETS is not a tax, it is an emission scheme. Fly without emitting carbon and there is no need to purchase certificates. But there’s the rub. It is currently impossible in any practical sense for an airline to fly without emitting carbon. Several years ago now, the industry tried to put in place a scheme to address some of these issues, through aviation’s international regulator, the International Civil Aviation Organization. But as with everything at ICAO, this is glacially slow and by the time every nation’s concerns are met, mostly ineffective. And so it proved for emissions. The resulting scheme, Carbon Off-Setting and Reduction Scheme for International Aviation (CORSIA) is at best a sop. Governments, which, yes, agreed to CORSIA at ICAO, are under huge pressure now, as seen so clearly in the protests around the world, to Do More Something. CORSIA is being isolated.
One of the biggest takeaways from the finance ministries meeting in The Hague was not just that there is a way to tax fuel – on a coalition of the willing basis – but that the industry is very lightly taxed generally. So in a move that shocked precisely no one, except apparently the entire aviation industry, Germany has announced that it intends to increase its ticket tax. That increases the price of the tickets, but its impact on decarbonization is more arguable, and tenuous. As I mentioned last time, the U.K. experience, even with a rapacious departure tax, is that growth continues. Ominously however, the German announcement noted that this is only one part of a package of measures to be discussed on Friday.
Tax is a tool of government policy, and so with this new tax, which appears carefully calibrated to hurt least the German carriers and the German carriers that operate hubbing services least of all. There is only one German carrier that offers hubbing services. Domestic flights will be subject to the increased tax, but flights that are the domestic legs of an international journey are exempt. In other words, all low cost carrier flights are taxed, but not all of Lufthansa’s. A win-win, for Lufthansa. Perhaps that is a cynical view, and once the full package of measures is announced Lufthansa will be smiling less.
The fact is that, currently, decarbonization can only mean less flying. For all the energy the airlines have spent on complaining and building off-setting smokescreens and demanding that they be considered special, they have left the field open for treasuries around the world to think of taxes that they can levy. The airlines singularly did not get out in front of this debate, impose a levy on all flights unilaterally and then channel those funds to research they could control. They should have.
The shame of that supine approach is flygskam. Airlines like to talk about how much better things are now than they were in the bad old days, but that is like trying to tell the protesters at the current school strikes what a hassle it was to rewind cassette tapes and to look after your phonograph. The industry does not seem to understand just how far the narrative has moved and the credibility gap it faces. It has ceded control and is now paying the price. One tax at a time.