Transport Online – Flight tickets more expensive due to environmental measures

AMSTERDAM – Now that the European Union (EU) has agreed on a tightening of the EU Emissions Trading System (EU ETS), aviation must pay more for CO₂ emissions. In combination with the increased excise duty on airline tickets, the price of a return trip from Schiphol to Barcelona can easily be 47 euros more expensive, reports Stef Driessen, Sector Banker Leisure ABN AMRO | Industry expertise.

The EU ETS emissions trading system has been in place since 2005 and sets the maximum number of emission allowances for a range of greenhouse gases for sectors such as industry, energy production and aviation. Each year, a small portion of these rights are given away for free, while the majority are auctioned off. Companies can then use or sell these rights to other companies. By putting a price on emissions, companies get a financial incentive to reduce emissions as soon as allowances become more expensive than savings measures.

Tightening of the EU ETS

The European Parliament and the European Council agreed on 6 December to help make the aviation sector “Fit for 55”. They do this by legally stipulating that the sector’s net emissions of greenhouse gases must be reduced by at least 55 percent by 2030. Due to the stricter rules, the free emission allowances for the aviation sector will be phased out until 2026. In 2024, 25 percent fewer free allowances will be given quotas away, the following year another 50 percent and in 2026 these quotas will only be available via an auction.

Although the amount of emission allowances does not itself decrease as a result of the removal of the free allowances, it is also agreed in the new agreement that the total number of allowances must decrease by 4.3 percent per year up to and including 2027 and with 4.4 percent thereafter until 2030. This was 2.2 percent per year in the old system. Reducing the free allowances and limiting the total number of allowances will most likely result in an increase in the price of these allowances on the EU ETS trading system. The higher the prices, the more profitable it becomes for airlines to take emission-saving measures. This effect is reinforced by the airports. For example, planes that produce more emissions or noise pay significantly more to land at various airports, including Schiphol and Düsseldorf. The oldest and most polluting planes are no longer allowed to land at these airports.

Excise duties up

In addition to the tightening of the EU ETS, the excise duty on airline tickets has been increased from 7.95 euros to 26.43 euros from 1 January 2023. It is clear from the coalition agreement that the intention is to encourage greener behavior with the increase in excise duty and i.a. create more equal conditions between car, bus, train and plane.

There is no tax on jet fuel. This international agreement was reached in 1944 because commercial aviation operates in multiple jurisdictions, each with its own tax system. This makes a big difference with other means of transport. For example, the excise duty for a liter of petrol will again be 78.91 øre from 1 July, and 21 percent VAT will also be imposed on fuel for passenger cars and buses.

Significant costs per ticket

The exchange rate for the emission quotas in the EU ETS was 87.70 euros on 21 December. For a return from Amsterdam to Barcelona, ​​this corresponds to 20.70 euros in extra costs for the airline. When the 26.43 euros in excise duty is added to this and all these costs are passed on to the passengers, it means that the ticket becomes up to 47.13 euros more expensive.

Further expansion on the way

It is clear that flying, at least within the EU, will become significantly more expensive. However, flying to countries that do not participate in the EU ETS system will become relatively more attractive until an international system is introduced or an extension of the EU ETS for flights between EU member states and non-EU countries.

In 2026, the EU will decide whether the EU ETS system for aviation should be replaced or supplemented by the international emissions trading system CORSIA. This system is developed by the International Civil Aviation Organization ICAO. The main difference between CORSIA and the EU ETS system is that it will also apply to all flights outside the EU.

Leave a Comment