Market News

 June 12, 2009
Passengers should pay global carbon tax, says British Airways chief

 Airline passengers should pay a global tax on carbon and accept an increase in the cost of flying for the sake of the environment, the chief executive of British Airways has told The Times.

The airline is the first in the world to propose that all airline passengers should pay an additional sum which would be likely to rise steadily over time.

BA is proposing that the tax should raise at least $5 billion (£3 billion) a year to be used to combat tropical deforestation and help developing companies to adapt to climate change.

The airline has joined forces with Virgin Atlantic, Air France, Cathay Pacific and Qatar Airways to call for aviation emissions to be included in a global deal on climate change due to be agreed at the United Nations conference in Copenhagen in December.

They are proposing that the conference should set an emission reduction target for international flights, which were excluded from the Kyoto climate change agreement.

But Willie Walsh, BA's chief executive, has gone further than the others by explicitly stating that passengers should expect to pay more for their flights to compensate for their environmental impact.

He said airlines should be forced to buy permits from 2013 to cover their carbon emissions in a global emissions trading scheme.

"It would increase [airline] costs. It has to increase fares. For the industry to play its part the people who benefit from that industry - the passengers - are going to have to pay.

"Airlines can't escape the responsibility of addressing the impact that aviation has on the environment. We accept that our industry has got to improve."

Mr Walsh refused to predict how much the carbon tax would be for each ticket, though it would vary according to the length of the flight and the efficiency of the aircraft. He said that the cost per passenger - and the overall sum raised by the global tax - would depend on the cost of carbon emissions permits on the global market.

"It could be four or five times the $5 billion if the price of carbon goes up. The critical thing is to cap overall carbon dioxide and then provide financial incentives to industries that have other fuel sources and technologies to reduce their CO2 output."

BA is effectively proposing that airlines should offset their emissions by helping pay for investment in low-carbon technology in other industries which would find it easier to use alternatives to fossil fuels. Airlines would buy unused permits from these industries.

BA supports the European emissions trading scheme, which is due to include all flights landing or taking off from EU airports from 2012.

But Mr Walsh said that the EU scheme did not go far enough and would disadvantage EU airlines.

"We need a global deal for aviation, rather than a patchwork of regional initiatives - to avoid creating perverse incentives for CO2 increases in some parts of the world and to maintain a level competitive playing-field."

BA is proposing that global aviation emissions should be limited to their 2005 level and then reduced over time.

The International Air Transport Association, which represents 230 airlines, 93 per cent of the global industry, is proposing a much weaker target. It wants aviation emissions to be allowed to continue growing until 2020.

Peter Lockley, head of transport at conservation group WWF, said: "We are pleased that BA is taking a lead on this issue. We may not agree on all the details of how to design an emissions trading scheme but it's a welcome political signal.

"We encourage Willie Walsh to redouble his efforts to persuade his US counterparts to join his initiative."

No US airline has yet joined the BA-led group.

The total number of air passengers worldwide will more than double to six billion by 2026, up from 2.5billion in 2007, according to report published yesterday by the consultancy Oxford Economics.