Airlines have criticised the Dutch plan to phase out fossil fuel subsidies across Europe, saying that such a move is fanciful unless there are more affordable and environmentally friendly travel options.
Michael O’Leary, the CEO of Ryanair and Carsten Spohr, the chief executive of Lufthansa were two European airline executives that said last week at a press briefing that train fares are still too high to replace air travel and plans by policymakers to make aviation more sustainable through cutting subsidies would backfire.
Last month, the Dutch government announced that they would spend up to €46.4bn by 2023 to support fossil fuels. This could be through direct subsidies and tax schemes which indirectly lead to more polluting energy being used. Fuel for aviation, which is exempt from EU taxation, accounted for more than €3.6bn of the total.
Rob Jetten, Dutch climate minister said that reforming taxation and cutting subsidies were “crucial” for a clean transition and that governments “should redesign the rules of market”.
He said that the EU should “take action” on fossil fuel subsidies. This includes those that are a result of international agreements, such as those for shipping and airlines.
O’Leary said that until you offer an affordable alternative to the voters and consumers in Europe, all of this is just a pipe dream.
Ourania Georgoutsakou is the managing director of Airlines for Europe. She said that raising fuel taxes for airlines will increase costs, which “will at some point impact the passenger”.
Fuel costs airlines about 25% of their total operating expenses. Aviation is one of the hardest sectors to decarbonise. Alternatives to jet fuels are still in their embryonic stages.
Last week, the airline industry reiterated its call for increased support in order to increase production of sustainable fuels and reduce their cost. These fuels are much less polluting than Kerosene.
Spohr stated that European airlines struggled historically with thin margins and low profitability, which left them with limited capital for decarbonisation.
The industry has enjoyed a good run despite high ticket prices. According to the trade association Iata, European airlines will post a combined net profit of $5.1bn this year after losing more than $45.bn in the pandemic.
Wopke Hekstra, EU’s climate commissioner, also supports plans to phase-out fossil fuel subsidy schemes, although “there is no guarantee as to the outcome”, according an EU official.
O’Leary, however, dismissed the Dutch initiative to phase out fossil-fuel subsidies, including exemptions from kerosene taxes and VAT on passenger transport for airlines, as “a wish list”.
A proposal by the EU to update its energy regulations in 2019 – which was intended to eliminate many fossil fuel subsides – has been stalled because it needs unanimous approval from each of its 27 members, which is unlikely.
As part of the negotiations leading up to UN COP28 Climate Summit, in December, EU ministers will discuss Monday support for fossil fuels.
The Dutch government is among the most strict in Europe when it comes to airlines, as they try to reduce carbon emissions and reach their goal of net zero by 2050.
The Hague raised air passenger duties in January and in February, it capped the number of flights allowed at Amsterdam Schiphol Airport, the Netherlands largest airport.
According to a source close to the negotiations, other European countries such as Ireland, Austria, and Denmark have also expressed support for the subsidy elimination plan.
Jetten admitted that certain sectors will have to “pay extra in energy taxes over the next few years — which makes perfect sense, because they’ve used [fossil-fuels] at extremely low prices for an extremely long time and that we need change”.