Making commercial aviation greener comes at a price. In Spain, tax increases could bring a reduction of 11 million international tourists, a 1.6% reduction in GDP (€23 billion) and 430,000 fewer jobs by 2030, according to numbers presented by consulting firm Deloitte. The expected decrease is linked to the implementation of measures set out for aviation by the European Commission (EC) within its ‘Fit for 55’ legislative package, which intends to meet long-term emissions reduction targets, along with the possible introduction of a ticket tax included in the White Paper on Tax Reform.
The European Union has set itself the binding goal of achieving climate neutrality by 2050, which is meant to accelerate thanks to the ‘Fit for 55’, presented in July last year, through measures aimed at bringing forward by 2030 a cut in CO₂ emissions by 55% from 1990 levels. This entails approving specific provisions this year for the transport sector including aviation.
The new European legislation covers some policy areas that will have a major impact on operations: reforming emissions trading, fuel taxation and sustainable aviation fuels (SAF). Additionally, there are fiscal measures that governments want to implement such as fuel and ticket (passenger) taxes.
We are willing to assume a cost to the extent that it contributes to the decarbonization of the sector.Javier Gándara, chairman of the Airline Association (ALA)
The conclusions of the Deloitte report on the impact of the measures, “Flying towards a sustainable future. An analysis of the socioeconomic cost for Spain due to the overlapping of measures on the airline industry”, were presented by Jesús Valero, partner in charge of Economics at Deloitte Financial Advisory, at a meeting organized by the Airline Association (ALA) and the Spanish Confederation of Business Organizations (CEOE).
Some of the points mentioned by Deloitte include the use of a 5% quota of sustainable aviation fuel (SAF), between 3 and 6 times more expensive than conventional fuel, depending on whether it is of biological or synthetic origin, established by the European Refuel Regulation. The restriction of CO2 emission allowances, with the consequent increase in their cost, as stated in the legislative proposal to modify the Emissions Trading Scheme (ETS). The application of a tax on aviation kerosene of 7.53 euros/gigajoule, as proposed in the reform of the Energy Taxation Directive. The possible application of a ticket tax of €7.85, as proposed in the White Paper on Tax Reform.
For European airlines, several of these measures will make them less competitive with competitors in other regions, which are subject to different and less stringent sustainability policies.
The report concludes that the simultaneous implementation of these four measures in 2030 will result in a higher cost to travel to Spain, with the consequent reduction in the number of international tourists and the subsequent economic impact. Deloitte estimates that more than 11 million international tourists would be lost.
More than 12 billion euros of spending, not only in the airline sector, but in a variety of sectors. Among them, the accommodation sector (-3.6 billion euros) and the food sector (-3.2 billion euros), both dependent on tourism. 23 billion of GDP, or 1.6%, and 430,000 jobs compared to the size of the economy in the base case in 2030. Most of this drop would be due to the implementation of the fuel and ticket tax.
According to Deloitte, the tax measures would cause a 0.9% drop in GDP and an additional loss of 236,000 jobs, a magnitude similar to the number of pre-pandemic jobs in real estate activities in Spain. Environmental measures (SAF and ETS): would lead to a 0.7% drop in GDP in 2030 and a loss of 194,000 jobs, equivalent to the number of pre-pandemic jobs in the motor vehicle manufacturing sector in Spain.
Javier Gándara, president of ALA, pointed out that the industry agrees with the environmental measures that contribute to achieving the goal of climate neutrality by 2050, as is the case of the introduction of sustainable fuels SAF and the implementation of a system of emission allowances ETS.