TRUTH ABOUT FLYING(and KLM)

Bill Hemmings - 23rd March 2018

KLM; world’s oldest Airline = #12Netherlands Population 17.2m = # 66

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Industry going gangbustersPays no tax

Heard that before?

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Coffee shops better marginWhat’s the NL tax take?

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Top European Airports (spot the odd man out)

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Rank

Airport Total pax People

1 London Heathrow Airport (United Kingdom) 77,987,524 65m

2 Paris Charles de Gaulle Airport (France) 69,471,442 65m

3 Amsterdam Airport Schiphol (Netherlands) 68,515,425 17m

4 Frankfurt Airport (Germany) 64,500,386 82m

5 Istanbul Atatürk Airport (Turkey) 63,727,448 83m

6 Madrid Barajas Airport (Spain) 53,402,506 46m

AVIATION > 5.5%6

Emissions Growth7

DECARBONISATION

• All current policies fall well short • CORSIA doesn’t even target aviation CO2• EU ETS now has declining cap • Non CO2 - ignoring the elephant• Traffic growth far outstrips efficiency • Technology - no quick fix; several generations• Regulators powerless against the duopoly • Sector is hopelessly undertaxed• Fuels have some potential

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PARIS GOALS FOR AVIATION10

Source: http://takvera.blogspot.be/p/global-emissions-gap-scoreboard.html

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CORSIA V EU ETS13

NON-CO2

● Action first called for in ETS 2008 Directive● 2008 CE Delft study on NOx charge shelved● ETS Revision 2017; Article 30 new paragraph 5;

“Before 1 January 2020, the Commission shall present an updated analysis of the non-CO2 effects of aviation, accompanied, where appropriate, by a

proposal on how best to address those effects.”

● What is the latest science● How to address NOx?● Avoid “contrail/climate sensitive areas”

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PROPULSION

Biofuels in transport - bad experience on roadMultiplier for aviation in REDDII; little impact Sustainable bio-based alt fuels - limited potential Power-to-Liquid - Fischer TropschDrop-in fuel technology ready TRL8Needs scaling - 5x times price gap 1% mandate adds $20 to $500/tonne or €3.20/paxSafeguardsWon’t fix non-CO2...

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AVIATION SOLUTIONS

Dr Lucy Gilliam - 23rd March 2018

GROWTH OF EMISSIONS

● ETS is having only minor impact ● Traffic growth globally strongest ever >10% ● Emissions are growing at 3% per year globally

according to IATA, 3-6% according to Larkin et al.● Growth is 8% in Europe (2016)● Boeing says transport doubling every 15 years on

current trajectory (4.4% pa)● Efficiency gains in aircraft around 1% & declining● No silver bullet in engineering to decarbonise planes● Alternative fuels expensive and not available at scale

THEREFORE: We must price aviation better...

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PARIS GOALS FOR AVIATION20

Source: http://takvera.blogspot.be/p/global-emissions-gap-scoreboard.html

SOLUTIONS1) Taxing aviation more

a) VATb) Kerosenec) Ticket taxes

2) Investing in synthetic fuels 3) Flying less

a) Modal shift in mobilityb) Demand management

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TRUE COST OF FLYING

EU Budget (2021-2027) unique opportunity for reform aviation to pay for pollution & contribute tax revenue

Kerosene Taxes, VAT, Ticket taxes● Kerosene taxation limited by Energy Taxation

Directive. Domestic only NO and NL● Intra-EU flight tickets VAT exempt● VAT rules now being reformed● Ticket taxes exist in UK, Sweden, Norway,

Germany, Austria, Sweden

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MFF - EU BUDGET 2021-2723

Ticket tax

● Many countries have - on both departure and arrival

● Solely national decision● Doesn’t directly incentivise fuel burn reduction● So airlines discredit if the claim is green● UK APD 1993 - introduced as revenue raiser● Tax is on passengers - airlines must collect● UK - easiest/cheapest tax to collect - airlines do

the work ● All pay - companies may get VAT back

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CE Delft study; tix tax - do’s & dont’s

● Ticket taxes don’t contravene Chicago Convention

● ICAO resolutions against taxation non-binding - EU files reservation

● Exempt transfer/transit pax - double taxation ● Treat all EU airports the same - discrimination● Distance bands● No direct link to fuel burn

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Industry action26

Country with ticket tax

Belgium UK The Netherlands Ireland Germany

Plaintiff B.A.R. Belgium, Sabena and Lufthansa

Federation of Tour Operators

Maastricht Aachen Airport and Ryanair

Ryanair American Airlines

Legal grounds opposition ticket tax

Art. 15 Chicago Convention

Art. 15 Chicago Convention, First Protocol (A1P1) to the European Convention on Human Rights, Art. 49 of the European Treaty.

Art.15 Chicago Convention; State aid due to exemption transfer passengers benefitting transfer hubs like Schiphol

State aid due to tax differentiation benefitting Irish airlines

Numerous violations of Chicago Convention,EU-USA Open Skies Agreement and Friendship, Commerce and Navigation Treaty

Result of case Ticket tax abolished All complaints dismissed

All complaints dismissed

European Commission required revision of differential tax rate

All complaints dismissed

Part of tax amended Abolished None None Distance element was removed

None

Tax status Abolished In place Abolished Set to Zero In place

VAT on tickets

● Intra-EU tickets VAT exempt since before EU

● Abolish exemption - IATA oppose● Now Commission giving in● Member states wants total flexibility on

rates● Place of supply complication ● Changes to point of departure in 2022

ACTION: We must fight for negative list & place of supply rule change

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Aviation Fuel tax

● Brazil, India, Japan, US all have domestic fuel tax

● Prohibited in Energy Tax Directive until 2003● Domestic then permitted - NL, NO● Intra-EU allowed after 2003 - bilateral

agreement● Complication is foreign carriers● Fuel tax exemptions in ASAs slowly being

abolishedSolution is ‘de minimis’ and bilateral waivers

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German Luftverkehrabgabe● Introduced in 2011 as revenue-raiser ● Passenger numbers still increased, but report found

law-fares airlines and regional airports suffered dampened demand

● 0.6% fall in aviation emissions, 1-2m fewer passengers, close to €1bn a year raised

● Repeated opposition from industry, however rising ETS allowances prices might be the newest threat

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Swedish ticket tax● Due to come into force in two weeks (April 1st) ● Government study found that CORSIA and ETS

were insufficient pricing signals ● €7.88 for short-haul/EU and €42.36 for long-haul

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COUNTERING INDUSTRY Ryanair’s “route closing” argument

● Used to end Irish ticket tax in 2012● Currently being used against Scottish government ● However used only against small nations: Ryanair

currently expanding in Germany

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COUNTERING INDUSTRY “Increased revenue” argument

● A4E calling for taxes & increased share of EU budget ● German study: €260m lost government revenue, but

€1,240m increase. €1bn net gain. ● More libertarian anti-tax argument than argument

against aviation taxation

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COUNTERING INDUSTRY

Tourism argument ● Little evidence that tourism suffers from modest

levels of taxation ● Aviation costs only small part of overall holiday costs ● Any negative impact on tourism can be offset by

decreasing other taxes (i.e. on hotels or alcohol)

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FREQUENT FLYER LEVY● 70% of flights taken by 15% of people (UK

CAA Data)● 57% of population don’t fly at all in a year● Issue of hypermobility - small number of

people flying frequently

Solution: Frequent flyer Levy?● Everyone gets 1 untaxed flight● Tax kicks in at low amount and increases

with each subsequent flight● Spend money to green aviation

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http://afreeride.org/#afreeride

PROPULSION FUELS● Biofuels in transport - bad experience on road● Multiplier for aviation in REDDII; little impact ● Sustainable bio-based alt fuels - limited

potential ● Power-to-Liquid - Fischer Tropsch

○ Drop-in fuel technology ready ○ Needs scaling - 5x times price gap ○ 1% mandate adds $20 to $500/tonne or

€3.20/pax○ Safeguards○ But won’t fix the non-CO2 problem….

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FLY LESS, ENJOY MORE38