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Taxing under the guise of helping the environment: a nonsense

  • Dutch “ecotax” will prevent growth at Schiphol
  • No contribution to carbon reduction, just a tax
  • Flaw with unilateral taxes is that they merely divert traffic, not prevent it
  • National distortions undermine global warming initiatives

Gerlach Cerfontaine, President and CEO of Schiphol Group yesterday predicted zero passenger growth at Schiphol after the so-called “ecotax” is imposed from 1-Jul-08. Some environmentalists would be happy at that – indeed many see zero aviation growth as a desirable direction.

But that is missing the real point. A serious flaw with the unilateral Netherlands plan to impose a substantial each way tax on every point-to-point (not transfer) passenger is that in reality it will not achieve anything like that. All it does, in the crowded skies of Europe, is to divert traffic to other airports. And, like the opportunist UK “green tax” last year, revenues raised will flow straight into consolidated revenues, rather than using it to help offset carbon emissions. There appears to be a serious double standard here, where commercial entities - which drive the economy - have a responsibility to save the environment, but governments can have a free ride.

Schiphol is already lagging several other major European airports in growth rate and neighbouring Brussels Airport meanwhile is surging ahead on the back of high traffic levels stimulated by LCC operations. In cases where Dutch consumers and visitors will see fit to drive to Brussels to pick up low fare operators, the environmental impact is only increased.

European airports’ passenger growth: 11 months ended 30-Nov-07:

Source: Centre for Asia Pacific Aviation & company reports

The European Low Fares Association, whose members are directly targeted by this tax, has stridently condemned it on economic grounds too: “Aviation is for the Netherlands today what shipping used to be in earlier centuries, namely its economic lifeline. Imposing a tax that will cut this lifeline is economic suicide for a country that has been at the heart of international trade for centuries. When a tax is expected to raise  euros350m but would cost the economy euros 1bn and 12,000 jobs there is only one solution but to reject it.”

But the bottom line is that these locally engineered taxes, generally cynically imposed to raise revenues, actually undermine global attempts to fight global warming.

The issue is global, just as the industry is global. By creating national distortions – for domestic political purposes – the broader process of rationalisation and cooperation is made much more difficult. The Dutch tax is a major setback to serious efforts to improve our environment.

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