Sheena McGuinness

Written by: Sheena McGuinness

Sheena McGuinness

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Opportunity to enshrine carbon targets in any airline bailout package

Could the Government combine a bailout package for airlines with meeting its net-zero carbon commitment? 

As the coronavirus leaves airlines struggling to stay afloat and in crisis bailout talks with the Government, now is an opportune time to enshrine carbon targets into any industry-specific Government package. The current issues faced by airlines are well publicised as fleets have been grounded and international travel curtailed in the fight against the spread of coronavirus.  

Unsurprisingly, data on the impact on the environment of the unprecedented lockdown has recorded profound and positive impacts. In the UK, the sharp reduction in road and air traffic has improved air quality, with toxic small particulate matter showing a reduction of as much as 50 per cent in some major cities. Air travel currently accounts for more than 30 million tonnes of carbon emissions a year, so any opportunity to reduce this will assist in meeting the net-zero targets. 

Professor Sam Fankhauser, co-director of the Grantham Research Institute and former deputy chief economist at the European Bank of Reconstruction and Development, said the coronavirus crisis presented an opportunity to build a greener economy. He emphasised: ‘As we move into rebuilding the economy, we can pay attention to the carbon intensity of the stimulus packages.’ 

For his part, Chancellor Rishi Sunak wrote to aviation executives last week to say that he would only consider measures to shore-up individual businesses as a last resort. Airlines can of course avail themselves of the package of measures announced by the Government, but an industry-wide bailout package is not being contemplated at present. Nonetheless Rolls Royce and Airbus continue to lobby the British Government on behalf of Virgin Atlantic to secure a £500m package of loans and guarantees. ‘There are obvious reasons why Virgin and EasyJet aren't the first in our wish list of companies to help’, said one Government figure.

On the face of it, the optics for the airlines are not good for a specific bailout package. Nonetheless, given the improvement in air quality, could the British Government be missing a trick in not turning the current predicament to their advantage to assist in meeting its own legally binding net zero target?

There is an obvious conflict of interests between air travel and net zero, but the two do not necessarily need to be mutually exclusive. For example, any package of measures could include a legally binding commitment for any airlines participating in a bailout scheme to allocate a proportion of revenue or profits to new engine and aircraft technology to support the transition to net zero. The use of robust carbon offsets, using alternative and sustainable fuels, and investment in innovative carbon removal solutions should all be legally binding commitments for airlines, in the event of any bailout.

Transport Secretary, Grant Shapps said: ‘Aviation has a crucial role to play in reducing carbon emissions, and with the help of new technologies, renewable fuels and our continued international co-operation through the UN agency and the International Civil Aviation Organisation, we’ll be able to strike that balance, creating a greener and cleaner future.’ International aviation and shipping previously stood outside the remit of the UK’s original Climate Change Act (2008) targets. However, they were added to its updated 2050 target earlier this year after green campaigners accused the Government of ‘creative carbon accounting’.

Amid the devastation caused by the coronavirus, the shutdown has been credited with giving hope of how a low carbon economy may be achieved and the aviation sector may be a key part in this, if the Government does design a bailout package for the airlines. There is a precedent for this. The Government bailout of banks after the 2008 financial crisis was followed by stringent regulations and additional bank levies across the board, so it is not beyond the realms of possibility that the current global adversity is ultimately used as an opportunity to build a greener economy.

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