The European Union’s (EU) Emissions Trading Scheme (ETS) is now up and running. Bureaucrats in Europe figured if they charged airlines for burning fossil fuels when traveling to Europe, the airlines would have an incentive to save fuel and, hence, improve the environment.
These architects of environmental purity have gotten it all wrong. The economic reality of new fees is costing consumers, not the airlines, money.
For Americans planning on traveling, the airlines just added $6 to each round-trip. Worse, the scheme will not do an additional thing to help the environment since the money being collected is not even earmarked for saving the planet, but will most likely be used for changing the environment of EU offices in Brussels. There is no requirement that this revenue go to emissions related research and development.
Economists have long argued that taxes on corporations are really taxes on the end users of the corporate products. All of the scholarly economic articles in the world, conclude that consumers end up paying for emission trading programs, one way or the other. This airfare increase announced by U.S. airlines after the announcement is the perfect poster child of a fee pass-through that aims at the industry and hit passengers.
Just like 1+1=2 — airfare+fee=higher airfare.
It seems that EU bureaucrats with the approval of the European Court of Justice have just come up with a way to squeeze fees from U.S. and other international companies and their consumers for activities taking place far outside EU borders and in international airspace.
Few industries are as focused on saving fuel and reducing carbon emissions as is the airline industry. Fuel is their biggest expense. Airplanes gulp jet fuel by the thousands of gallons. Any savings from jet fuel will go directly to the airlines’ corporate bottom lines.
Airlines have been replacing equipment aggressively in order to save weight and thus fuel. They are replacing carpeting and airline seats. Fewer magazines are in seatback pockets. Investing are growing in new engine technology and winglets have been added to virtually every plane. Airlines are partners in development of futuristic alternative fuels that can be mixed with petroleum-based fuels.
Airlines seek to reduce their carbon footprint, not for some photo op at an environmental conference and to make the world want to sing their praises. They strive to save fuel to make money, lots of money — the best incentive in the world.
The day I see members of the EU parliament and government workers in Brussels removing the the back seats from their limousines and making sure their automobile trunks in their family cars are empty in order to lower the weight of their cars to improve fuel efficiencies, I’ll believe they may be serious about saving the environment.
Right now, EU governments are thumbing their collective noses at the rest of the world trying to make others take actions that they will not openly commit to take themselves. They are collecting money without mandating that it be used for controlling emissions. They have created a tax shell game which shifts the burden of fees to consumers. And, in the end, with a virtual automatic pass-through of fees to passengers, no airline will have any reason to save even a liter of fuel because of Europe’s ETS.