Airline bailouts with green conditions

18 May 2020

Interview with 

Richard Black, Energy & Climate Intelligence Unit; Brian O'Callaghan, Oxford University

AIRPORT

Airplane on the ground at an airport.

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Among the many economic casualties of this pandemic have been the airlines. The UK summer is about to start, but Heathrow airport is reportedly operating at one twentieth capacity, with a similar picture across the world. Many operators are asking the government for a bailout to help them weather the economic storm. Should we really be handing out public money to an industry that’s one of the major causes of climate change? Eva Higginbotham spoke to Richard Black, director of a think tank called the Energy and Climate Intelligence Unit...

Richard - It seems that the lockdown on the airline industry is going to carry on for months, and the impact will probably be felt for years, to be honest. Obviously for those airlines, they have a choice. They either close or shut down some of their operations, or they seek some kind of economic relief, bailout, call it what you will; and that's what most of them are already doing. Within Europe, airlines collectively have asked for well over 10 billion pounds, and one can expect those amounts to carry on going up, I think.

Eva - Isn't that kind of propping up an industry that we know has negative consequences, considering the emissions that we have from air travel and climate change?

Richard - Yes. I mean if you look across all sources of carbon emissions, aviation emissions are rising among the fastest of anything we do, basically. And ways to solve this through technology aren't immediately obvious in aviation. It's really difficult to see how those emissions can be brought down anywhere near to zero in the 30 years that scientists tell us it would be wise to bring emissions down to zero.

Eva - Does it seem likely that the airlines are going to be bailed out by the government?

Richard - Yes. I think it's inevitable that airlines will be bailed out. So then the question is really, will governments put any conditions on those bailouts? Air France, the national French carrier - they're going to have to halve their emissions from travel within France by 2024, in just four years. Now that can't be done by technology, so it does mean that Air France will actually be reducing the number of flights it makes within France. Of course France has a very good train network, and so there's talk for example, "well, any journey that could be done in two and a half hours, you just won't be able to fly that route Air France. Sorry." That's the sharpest example yet we have of a government that is putting environmental conditions on that airline bailout.

Eva - What other bailout conditions could governments set? I put this question to Brian O'Callaghan, a researcher from the University of Oxford' Smith School for Enterprise and the Environment.

Brian - Those green conditions could include reaching net zero carbon emissions by 2050; they could include intermediate targets like reaching 30% sustainable fuels by 2035; or a whole host of other green-type conditions.

Eva - Governments can set environmentally friendly conditional bailouts, but how do we make sure that the airline will actually follow through with the commitment?

Brian - The way you do that is by creating a negative result for failure to abide by the conditions. For example, if you're unable to meet a five year partial target, the government is able to say, "in exchange for the money that we gave you, we are taking half of your company and giving that half of the company to taxpayers." What that would mean is that existing shareholders and executives suddenly have their current shareholdings cut in half. That creates significant financial incentive for them to stick to the conditions which the government stipulate.

Eva - A classic example of carrot and stick then. "We'll give you some money now so your company doesn't go bust, but if you break your green promises, we're going to take ownership of some of your company." Now back to Richard Black.

Richard - Climate change is still going to be a problem once we've come out of the end of coronavirus. Why would you put loads of what's essentially public money, our money as taxpayers, into industries that are going to carry on emitting carbon dioxide and which will therefore create serious problems in the future with climate change. I think there are two ways of philosophically looking at bailout. One is that you'd simply try to go back to business as usual. The other is that you actually anticipate the future and you look at where economic trends are going, and you try and build industries that will have strong survival, they'll be sustainable in the future. Because then you're helping where the market is going anyway, and you're building industries that will be sustainable in the future. So I think there are two rationales for doing this. One is purely economic and looking to the industries of the future. And the other is that if you can basically meet your climate change goals at the same time as rebuilding the economy, why wouldn't you do that?

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