Special report: APD, aviation and global warming

5 Dec 2009 by Mark Caswell

Critics of the UK government’s Air Passenger Duty (APD) are refusing to quieten down, branding the tax anti-green, perverse and silly.

The United Nations Climate Change Conference in Copenhagen next week, while discussing more weightier issues, is likely to give fresh impetus to the value or damage that APD causes in Britain.

While not part of the talks in Copenhagen, in Britain it is still central to the great debate now going on in aviation – how best to mitigate airlines’ effect on global warming.

The government increased APD in November to £12 from £11 for a short haul economy class flight, and to £110 from £55 for a 6,000-mile plus premium long-haul flight, regardless of whether the passenger is in premium economy, business or first class. From November 2010, this highest tier will increase to £170 per flight, an increase of 112%.

With these increases of APD, the government attempted to establish it as a green tax, aimed at curtailing the number of people who fly by increasing the cost of air travel.

In ‘Aviation duty: response to consultation’, HM Treasury said that “APD will continue to ensure that the aviation industry reflects environmental impacts and makes a fair contribution to the public finances.”

But according to many airlines, APD is a tax on travel, and worse, an anti-green tax. Andy Harrison, CEO of Easyjet, went so far as to call it “silly” and “perverse from an environmental perspective”.

“APD will impact the airlines, but have no impact on the people that can deliver the technology for greener aviation.”

Harrison also called it “daft” that a fuller aircraft pays more tax, when it is actually acting more efficiently by carrying more people. He also questioned why newer, more efficient aircraft pay the same amount as older, less efficient planes, and has called for a law to ban “old smokers”.

The aircraft Easyjet fly, A319s, are 21 per cent more fuel efficient than the 1980s’ MD82, said Harrison, which are still in use in Europe.

British Airways (BA) also questioned the validity of APD from a green perspective for the same reasons.

“APD rates are the same for each route, irrespective of the emissions levels of the aircraft flying it,” said BA.

The British flag carrier suggested that carbon trading is more effective than taxation, “as it provides a financial incentive for the aviation industry to improve its environmental performance.”

Aircraft manufacturer Airbus has also said that APD is counter-productive as an environmental tax, especially when the money raised is not being used to create the green technology for the future.

A spokesperson for Airbus said: “If you take money away from the industry, it takes away the ability for the industry to actually invest in innovation and technology.

“By reinvesting any taxes in helping industry improve technology or invest in technology, that’s the way to get to a solution, not to actually punish the industry.”

The government has said that APD is likely to continue even if the controversial European Emissions Trading Scheme (EU ETS) comes into operation.

For some, the EU ETS should be a replacement for APD, but many are saying that a European-only scheme is not enough.

The International Air Transport Association (IATA) is calling for a global approach to aviation and climate change, which many hope will come out of the talks in Copenhagen.

“A global sectoral approach would account for aviation’s carbon emissions at a global level as an industrial sector, not by state,” said IATA.

“This would ensure that aviation is fully accountable for its emissions, and through access to global carbon markets would pay for its emissions once, not several times over.”

Mike Carrivick, CEO of the Board of Airline Representatives for the UK (BAR UK), said that airlines are being “unfairly picked on”.

“One has to recognise that there is an environmental cost that airlines have to contribute to. You’ve got to be quite open on that,” said Carrivick.

“But even by the DfT’s (UK Department for Transport) own reckoning, the costs were being covered by APD before the latest increases. They’re exceeding them by £100,000 a year.”

Carrivick is also keen to point out that the next round of increases in APD in November 2010 may be a step too far.

“We have reached the tilting point… where the customer is going to say this is far too expensive, this is disproportionate.

“It is being implemented at a time when the airline’s economic situation, due to the worldwide economic crisis, has never been worse.

“I don’t think it’s the role of a tax to decimate an industry. That’s what will eventually happen.”

Steve Ridgway, chief executive of Virgin Atlantic, suggests it could be an election issue, and has called on the Conservative Party, which initially introduced the tax in the 1990s, to scrap further increases in APD if they win power at the 2010 election.

Mr Ridgway said: “These increases will not only hurt the aviation industry, but also harm the British economy.

“The government seems to claim this is an environmental tax despite a total lack of evidence to support this claim.

“Aviation is already paying its own way for carbon emissions generated and any further increases are simply lining government pockets.”

At a time when airlines are struggling to survive, perhaps green initiatives are not highest on the list of immediate priorities for aviation bosses.

But it seems that airlines are realising what they need to do to reduce emissions in the future, investing in biofuels, researching green technology and supporting carbon trading. APD, however, does not get the vote.

While the green debate continues healthily, the European aviation industry is still sick, with little sign of prosperity returning.

The question is whether the government will change its stance on APD after the Copenhagen talks, and does it recognise what might need to be done to save the airlines.

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Report by Sara Turner

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