Filenews 18 April 2023
By Lara Williams
Flying in the Mediterranean this summer? I hope you get a good offer, because cheap flights are becoming more and more scarce.
You probably already suspected that the era of paradoxically cheap short-haul flights in Europe was coming to an end. According to travel search engine Kayak, summer flights between the UK and the rest of the continent are currently a third more expensive than last year. Two new reports, however, make it clear that this is not just a temporary disruption.
New reality
It's the new reality for flights, as airlines face a huge decarbonization challenge and stricter laws to comply with new climate conditions.
The first negative condition for travellers' wallets comes from two major changes to the European Union's Emissions Trading System (EU ETS). Airlines must have enough emission allowances to cover every metric ton of carbon dioxide released into the atmosphere on flights starting and ending in the European Economic Area (the 27 EU countries plus Iceland, Norway, Liechtenstein), the UK and Switzerland. Right now, they get about half of those royalties for free. The deal, however, ends in 2026, as the share of royalties they have to pay starts to increase from 2024. This will effectively double the cost of emissions in just three years.
The unit price of emissions has also soared recently, surpassing €100 ($111) for the first time in late February – and it doesn't appear to be on its way back to lower levels. A report by Alex Irving, European transport analyst at Bernstein, puts the costs resulting from these changes for European airlines at around €5 billion for 2027.
The cost of carbon per metric ton from 2019
Decarbonisation
This is only the thin end of the wedge. Over the next three decades, aviation must transform from a polluting industry – planes are responsible for 2.5% of global carbon dioxide emissions – to a zero-emission industry. According to Destination 2050, Europe's industry's plan to reduce emissions is to invest in future aircraft and infrastructure, making the activity more efficient and using alternative fuels and carbon removal technologies.
A report by research groups SEO Amsterdam Economics and Royal Netherlands Aerospace Centre, commissioned by airline industry bodies, said the cost of net-zero emissions by 2050 amounts to a staggering €820 billion.
Target; Zero emissions
Both reports conclude that the industry will not be able to absorb these costs itself. The EU ETS changes alone will reduce the operating profits of the continent's six largest low-cost airlines (Ryanair, EasyJet, Wizz, Vueling, Eurowings and Transavia) by around 77%. This means that ticket prices will have to be higher, which in turn means that demand destruction is inevitable. As Irving writes: "If it had been possible to charge more without weighing on demand, airlines would have already done so."
Demand growth is a sensitive issue for airlines, as a recent battle over proposed flight cap caps between the Dutch government and Amsterdam's Schiphol Airport shows. The projections are strong: the International Air Transport Association (ATA) estimated that passenger numbers will almost double to just under 8 billion by 2040 from 2017 levels. Time will tell whether rising ticket prices will reduce this number, but the question remains whether this growth is in any way compatible with ambitions for carbon neutrality.
Difficult answers
The answer can be difficult to digest. Decarbonisation is quite difficult anyway without the extra passengers. An update from the Royal Society, for example, outlined that even meeting the UK's existing aviation demand with biofuels would require capturing around half of the country's agricultural land.
Fewer flights are, of course, the easiest way to reduce carbon emissions – and so reducing demand would have its own climate benefits. The aviation industry report calculates that, in 2050, falling demand from rising prices to make money for climate-sustainable aviation fuel would reduce emissions by 12%, while economic measures – such as emissions trading obligations and CO2 removal investments – would lead to a further 2% reduction, compared to a "business as usual" scenario.
However, there is something sad about saying goodbye to the low prices that made going around the globe affordable for millions of people. Especially since those who use airplanes more often are also those who can afford the extra cost. In the UK, those in the top 10% of the population use far more energy on flights than the poorest 20% of the population. Introducing a levy for those who fly regularly, as has been proposed by climate campaign groups, can help address this disparity and create a new funding stream for decarbonisation – although it would be extremely difficult to implement.
Income inequality in the use of aviation
It may be worth remembering that there are other ways to move around Europe. On Thursday, Eurostar celebrated the fifth anniversary of the London-Amsterdam route by claiming to have saved more than 83,000 tonnes of carbon dioxide which would have been released into the atmosphere by that time. As short-haul flights become more expensive, international rail travel may become more enticing – and accessible.
There are many unknowns when it comes to getting rid of aviation emissions. Much of the technology the industry expects to use, such as electric or hydrogen-fuelled aircraft, is not yet ready for takeoff. One thing is certain: these will be some very expensive and demanding decades.
Source: BloombergOpinion
