EU eyes ways to attach green strings to airline bailouts
Calls for an EU-wide kerosene tax grow as airlines receive state rescues
Europe’s governments are throwing billions of euros at their devastated airlines: Air France-KLM will get at least €9bn in taxpayer money from the French and Dutch governments; Lufthansa is currently embroiled in talks with Germany about how much control it should cede to Berlin in return for an aid package.
So as governments move to prop up grounded carriers, thoughts have turned to what taxpayers should demand in return.
With the political wind shifting on climate change, officials in Brussels are hoping the crisis is a way to finally get polluting airlines to get serious about the green transition. “For years the airline industry was supreme and resisted calls to reduce emissions. Now they are coming cap in hand to ask for help and we can’t waste this chance,” said a senior EU official.
Early on in the pandemic, the commission relaxed its state aid rules to allow governments to pump cash into flailing businesses. But Brussels is now under pressure to approve cash injections only if companies can prove their business models are compliant with global climate goals like the Paris Agreement.
Pascal Canfin, a French MEP and head of the European Parliament’s environment committee, wants Brussels to draw up “green transition pacts” for airlines receiving public money. If they fail to make commitments within six months — like investing in low polluting fuels or replacing polluting short-haul flights — the cash should be paid back and the companies sanctioned, said Mr Canfin.
“Just as companies who benefit from state aid and exceptional tax relief and who are found to have paid dividends to shareholders are forced to repay the money and get a penalty, the same could apply to companies who get state aid, but in the six months following this, have not signed a green transition pact,” he said.
For all the pressure, holding airlines’ feet to the fire is easier said than done. EU transport commissioner Adina Valean told MEPs on Tuesday that although green targets were well and good after the crisis, the point of the emergency state aid was to ensure that “companies can survive”.
Unlike other industries such as cars — where Brussels has wielded its regulatory clout with tough emissions targets — the EU has limited tools to get aviation to bow to green targets. At most, airlines are subject to the EU’s emissions trading scheme, which sets a market price on carbon for polluters.
With governments now forking out billions in bailouts, political pressure for a kerosene tax is also growing. Before the crisis hit, the likes of Frans Timmermans, commissioner in charge of the green deal, came out in favour of a kerosene tax that would specifically target airline emissions. Brussels is planning a review of its sensitive energy taxation directive next year in the hope that it could pave the way for an EU-wide airline levy.
“There is a certain paradox in the fact that big airline companies profit from a tax exemption and yet will receive a large sum of public money to help them in times of crisis,” said Mr Canfin. “The subject of the kerosene tax will surely come back on the table.”