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The dominance of aviation over less emitting modes of transport is due to a long history of massive government subsidies. Even in times of climate crisis, a huge amount of money in aviation subsidies supports the sector’s ambition of significantly increasing today’s forty million flights a year. The ‘polluter pays’ principle does not apply to aviation. In fact, the aviation industry is firmly against reducing aviation subsidies and plans to reduce their emissions with controversial Sustainable Aviation Fuel (SAF). However, data suggest that air flights must decrease if we want to stay within the 1.5C target – or even the 2C target. Hence, aviation subsidies must end.

Aviation emissions are on the rise

Until the Covid19 pandemic hit, air traffic doubled every 15 years, and from 2013 to 2019, aviation emissions increased by 33%. They currently account for 2-3% of global greenhouse gas emissions.

A recent report shows that to stay within the Paris Agreement goal of 1.5C of global warming, aviation emissions need to peak by 2025 and achieve net zero by 2030 – two decades earlier than the current roadmaps of the sector. This is, however, a highly unlikely event as 2024 will again see an estimated 40 million flights and over 70 million by 2035.

One may think that the incredible growth of aviation shows that it is a highly profitable industry. However, the aviation we know – characterised by crowded skies, cheap tickets and skyrocketing emissions – has only been possible thanks to heavy government subsidies.

What are subsidies?

The Organisation for Economic Co-operation and Development (OECD) defines subsidies as any measure that “reduces costs for consumers or producers.” The aviation industry is regulated by the 1944 Chicago Convention and bilateral Air Service Agreements (ASAs) between countries. The first only prohibits taxation of fuel on board an aircraft when it arrives in a new jurisdiction. However, ASAs have generally followed the International Civil Aviation Organisation’s (ICAO) longstanding promotion of an aviation sector with zero tax on all jet fuel, tickets, and VAT.

The most obvious subsidy is the general exemption of Value Added Tax (VAT) and the zero-tax policy on jet fuel for international flights in countries across the globe. Some countries like the UK, the USA, Canada, Brazil, and Mexico apply minimal tax burden for international flights. But most do not. In Europe, only seven countries apply taxes on international flights. While domestic flights more often apply VAT than international flights, they are still grossly undertaxed. For instance, although the UK has one of the world’s highest average tax rates per passenger, it still benefits the aviation sector with tax exemptions that amount to €10.4 billion (US$10.7 billion) annually.

The media may make it seem that airline losses are singular to the pandemic, where governments handed out $300 billion to airline companies. In fact, the International Air Transport Association (IATA) shows that from 1960 to 2010, airlines have more often operated at a loss than at a profit. In other words, governments have ended up paying the bill – one way or another.

For instance, government bailouts covered most of the world’s airline losses amounting to $25 billion and $30 billion in 1990-1993 and 2000-2005, respectively. This benefitted major airlines such as Air France, Alitalia, and LTU.

The Partnership for Open & Free Skies, a coalition of major US airlines, claims that Emirates, Etihad Airways, and Qatar Airways have benefitted from state interest-free loans, which have been largely cancelled, amounting to dozens of billions of dollars. Nevertheless, the US aviation sector was possible thanks to $155 billion in government subsidies between 1918 and 1998. Furthermore, the US government benefitted US airlines with direct transfers totalling $15 billion after 9/11 and $54 billion during the pandemic, and with longstanding tax exemptions and financial support in their international expansion.

International complaints between countries offer some insight into the obscure world of subsidies across the aviation supply chain. For instance, in 2005, the World Trade Organisation (WTO) ruled that the EU illegally subsidised Airbus with $18 billion, and that the USA illegally subsidised Boeing with $5.3 billion.

Sustainable aviation fuel

The playing field of aviation against cleaner modes of transport is clear and calls for the ramping up of jet fuel tax, ticket tax, and value-added taxes (VAT). For instance, the high-speed rail from Madrid to Barcelona emits nine times less GHGs than the plane. However, people mostly opt for the plane because it’s several times cheaper due to its meagre taxation compared to the high-speed rail.

Not surprisingly, the aviation sector strongly denies that upscaling taxes would have any environmental benefits. In fact, IATA believes that aviation can continue its unparalleled growth and reach net-zero emissions by 2050. It plans to accomplish this by reducing its GHGs by 50% with the adoption of Sustainable Aviation Fuels (SAF) and offsetting the rest. Although the International Renewable Energy Agency (IRENA) estimates that in order to meet net-zero emissions by 2050, IATA should reach a 90% emissions reduction with minimal use of carbon offsetting.

The term Sustainable Aviation Fuel refers to non-fossil fuels made from biofuel (from plant and animal origin) and raw materials from waste. From a life-cycle perspective of a fuel, SAF is often alleged to save between 70-90% of emissions compared to standard jet fuel. Nevertheless, the exhaust gas emissions from an engine using SAF compared to when using conventional jet fuel are practically the same. The main difference is that SAF entails the capture of CO2 during its production phase with plant and animal material growth.

However, many experts underline that SAF is no Panacea and offset programmes are often counteractive.

EU, IATA and the US have proposed a 63%, 65%, and 100% coverage of SAF of total aviation fuel, respectively. This may prove difficult given that today, SAF only represents 0.1% of aviation fuel.

The greatest concern is that SAF production will repeat the disastrous biodiesel experiences that led to the deforestation of virgin rain forests with monoculture palm and soya. Satellite images confirm that soya production has led to tremendous deforestation in Brazil by companies that claim deforestation-free. The EU – currently in the advanced phase of internal negotiation on the specifics of its long-term SAF policy – has not ruled out SAF derived from crops that commonly entail deforestation. Even if palm and soy are banned from SAF production, researchers from Hasselt University and MIT show that uncertainties within life cycle assessments of SAF produced from less damaging crops may result in significantly higher GHGs.

The inconvenient truth

Over 66% of aviation’s contribution to climate change is due to persistent contrails (or contrail cirrus) from jets. A non-CO2 effect. This explains that although aviation emits 2-3% of total GHGs, it actually contributes to 5% of anthropogenic climate change. The significance of this is that SAF or conventional fuel, hybrid or hydrogen, all produce contrails and thus all – to different extents – contribute significantly to climate change.

So what’s the best strategy?

Besides crutches like SAF, it is paramount to reduce air traffic. A study for the European Commission illustrates that incrementing the ticket price by 10% through taxes reduces air traffic by 9-11%. In the case that jet fuel is taxed in line with its global warming contribution, air traffic can be greatly reduced. Taxes should be especially stringent for the 1% of the world’s population that emits 50% of passenger air travel. The collected taxes can be crucial in boosting high-speed rails (HSR) and developing an emission and contrail-free electric aviation industry in the long run.

Even without taking into account the effects of the elimination of aviation subsidies, Transport & Environment estimates that if major EU cities were connected by HSR, intra-EU air traffic would fall 25%. The point being eliminating aviation subsidies can enable large investments in alternative sustainable mobility and greatly reduce emissions from aviation.