Transport & Environment

by Gaspard Granger, aviation and shipping policy assistant at T&E

Three prominent names in global business – Richard Branson (Virgin CEO), Paul Polman (Unilever chief executive) and Mo Ibrahim (founder of Celtel, the African telecoms company) – were invited by the BBC World Service to discuss the role of big companies in the fight against climate change. During the programme, In the Balance – Profit and the Planet, they unanimously agreed on the necessity of putting a price on carbon.

Discussion revolved around the question of profit versus the planet and the widely held belief that if they have to choose, companies will always opt for profit. That is why, according to Richard Branson, “we need governments to set ground rules”. And on that, he added, “governments need to get rid of all subsidies on fuels [and] introduce a carbon tax world-wide”. Clearly getting ahead of his fellow “airline bosses”, Branson went on to say that this carbon tax should apply equally to all airlines while recognising that “in the short term, by putting a tax on dirty fuel and by getting rid of subsidies, it might mean that you have got to pay a tiny bit more for airlines.”

Paul Polman, Unilever, agreed with the need to put a price on carbon because “you do not treasure what you cannot measure”. He emphasised that over 1,000 businesses had asked for that at the 2014 UN Climate Summit. He added that “more companies are starting to act to ensure that governments sign up to an agreement in Paris” later this year. “We are advocating strongly for a price on carbon,” he said.

Branson added that while “putting a tax on carbon may increase price a little in the short term, but, if sustainable energy is achieved, it will be less expensive in the long term”. This prompted Ibrahim to intervene. “There is a fallacy, something is completely wrong about the fuel subsidy stuff,” he said. “In developing countries, the poor guys have extremely low consumption. They don’t drive a four-wheeler, they don’t have four or five cars in the family. They go on buses, they go on foot. It is the rich households which have the power generators, the air conditioning and two or three cars. Those are the guys who are benefiting from the subsidies. It is 1 or 2 % of the population who have 80 or 90 % of the subsidy. It is rich guys.”

Stark reality

The reality is even starker for aviation – a privilege enjoyed primarily by the well off. Less than 5% of the world’s population fly. Over 40% of airline revenue alone comes from companies paying for employee business travel. Yet the world-wide fuel tax exemption for international aviation amounts today to over €65 billion a year. This was put in place by governments after the Second World War to stimulate the nascent aviation sector, but is now well out of date.

ICAO proposes to offset its emission above 2020 levels in 2021 by purchasing carbon offsets. ICAO estimates this will cost airlines between €1.9 and €6.5 billion a year by 2025. By then the fuel tax exemption will have grown to some €87 billion based on the estimated growth in demand.

Such an offset scheme is an important first step, but it is no substitute for effective carbon pricing which will drive emission reductions in the sector.

Read more about aviation and shipping in the COP21 negotiations on T&E’s Road to Paris site

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