Concept and Importance of Carbon Taxes for the Airline Industry

Only available on StudyMode
  • Download(s) : 60
  • Published : March 20, 2013
Open Document
Text Preview
Explain the Importance of carbon taxes for the airline industry. Can Ryanair and British Airways respond in the same way?

What is “Carbon Tax”?
In the past, polluting was free. Generating pollution has a cost, which is a cost on earth natural environment, our economy and earth way of life. A Carbon Tax changes this. Instead of being able to pollute for free, polluters must pay for a price for every tone of carbon pollution is created.

How does “Carbon Tax” affect the flight industry?
Industry must factor in the cost of carbon pollution in the business, just as flight companies factor in flight building and labor cost. Carbon tax has a great deal of importance in the airline industry. In 2008 the EU passed legislation to include aviation in the ETS. This means that from January 2012, overall CO 2 emissions of the aviation industry have been capped: Operators emitting more than their allocated amount of CO 2 will need to reduce emissions or - more likely - procure extra allowances. Therefore all operators flying to and from the EU will have to surrender one allowance for every tone of CO 2 emitted on a flight to and from (and within) Europe. The challenges of the ETS for airlines go beyond the immediate legal obligations. The costs for emission allowances will effectively introduce an additional commodity price risk into an operator's business strategy. Costs per passenger will increase but whether these costs can be passed through to customers depends upon the competitive position of the company compared with other operators. Increased ticket prices may reduce air travel and bring the substitution effect – Some passengers will choose not to fly as a result of increased fares and may divert to alternative modes of transportation.

How does British Airways response to Carbon Tax?
British Airways, the first airline to start a carbon offset scheme back in 2005, has gone live with an upgraded, user-friendly scheme that will enable passengers to offset the...
tracking img