By Paul Homewood
Would somebody like to tell me when anybody actually voted for any of this?
Jetting off to the Mediterranean this summer? I hope you got a good deal, because cheap flights are becoming increasingly hard to find.
You probably had an inkling that the era of absurdly cheap short-haul flights in Europe was coming to an end. After all, according to travel search engine Kayak, summer flights between the UK and the continent are currently one-third more expensive than last year. But two new reports make it clear that this isn’t just temporary turbulence.
It’s the new reality for flying as airlines face a huge decarbonization challenge and tightening climate-compliance laws.
The first headwind stems from two big changes in the European Union’s Emissions Trading System (EU ETS). Airlines must have enough emissions allowances to cover every metric ton of carbon dioxide released into the atmosphere on flights starting and ending in the European Economic Area, the UK and Switzerland. Right now, they get about half of those allowances for free. But that deal comes to an end in 2026, as the share of allowances they have to pay for starts to rise from 2024. That is effectively going to double their carbon costs over just three years.
The unit price of carbon emissions has also soared recently, topping €100 ($111) for the first time in late February, and it doesn’t seem to be on its way back down. A report by Alex Irving, European transport analyst at Bernstein, puts the resulting cost from these changes for European airlines at about €5 billion in 2027.
That’s just the thin end of the wedge. Over the next three decades, aviation has to transform itself from a polluting industry — planes are responsible for 2.5% of global CO2 emissions — to a net-zero one. Under Destination 2050, the European sector’s plan to reduce emissions, it’ll do that by investing in future aircraft and infrastructure, making operations more efficient, and using alternative fuels and carbon-removal technologies.
A report by research groups SEO Amsterdam Economics and the Royal Netherlands Aerospace Centre, commissioned by airline industry bodies, has put the cost of reaching net zero by 2050 at a whopping €820 billion.
Both reports conclude the sector won’t be able to absorb these costs itself. The changes to the EU ETS alone will slash the operating profit of the continent’s six largest point-to-point airlines (Ryanair Holdings Plc, EasyJet Plc, Wizz Air Holdings Plc, Vueling, Eurowings and Transavia) by an estimated 77%. That means ticket prices will have to be higher, which in turn means that demand destruction is inevitable. As Irving writes: “If it were possible to charge more without spoiling demand, airlines would have already been doing so.”
Demand growth is a touchy subject for airlines, as a recent battle over proposed flight caps between the Dutch government and Amsterdam’s Schiphol airport illustrates. The forecasts are strong: The International Air Transport Association suggested that passenger numbers would nearly double to just under 8 billion by 2040 from 2017 levels. Time will tell if rising ticket prices dampen that, but the question remains whether growth is even compatible with ambitions for carbon-neutrality.
The answer might be hard to swallow. Decarbonizing flying is hard enough without the extra passengers. A briefing from the Royal Society, for example, outlined that even meeting existing UK aviation demand with biofuels would require about half of the country’s agricultural land.
Fewer flights is, naturally, the easiest way to slice carbon emissions, and so a demand drop would come with its own climate benefits. The aviation industry’s report calculates that, in 2050, the drop in demand from raising prices to pay for sustainable airplane fuel would reduce emissions by 12%, and economic measures — such as emissions-trading obligations and CO2 removal investments — would lead to a further 2% reduction, compared with a business-as-usual scenario.
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April 18, 2023 at 03:06PM