Mises Wire
The EU Has New Airline Regulations and Consumers Will Pay
Airline Regulations
01/22/2025
Jack Watt
EU policymakers have created new regulation for the aviation sector. ReFuelEU Aviation mandates the use of sustainable aviation fuels (SAF) and bans fuel tankering—a common practice globally. It is another climate-related initiative that will hamper native industry, increase prices, and reduce choice for consumers.
Cheap fuel out, expensive fuel in
The main thrust is to increase use of sustainable aviation fuels (SAF), which are incredibly expensive. To cite a conservative estimate, SAF is around 250 percent more expensive than conventional jet fuel. This is somewhat alarming because fuel costs typically make up 25-30 percent of an airline’s total costs.
With the aim of bringing down the cost, the legislation aims to “de-risk” development. It imposes requirements on SAF usage, from 2 percent in 2025 to 70 percent in 2050, and grants favorable financing terms to producers. They will have access to funds raised by the EU’s “green bonds” and investment from the EU budget, itself raised by taxation from member states. Some funds will also come from revenues generated by another burden on airlines, the Emissions Trading Scheme (ETS), which airlines operating flights within the European Economic Area (EEA) and the UK are obliged to participate in (the UK ETS is slightly different but broadly aligned—it remains to be seen if a similar thing happens with ReFuelEU.)
Tankering Ban
Fuel tankering is where an aircraft operator loads extra fuel on a particular flight for the purpose of avoiding or reducing the amount of fuel required to be loaded for the return or next leg of a service. Sometimes the cost of carrying the extra weight is more than offset by higher fuel costs at the destination airport. But legislators have decided that as extra weight means more emissions, it must be banned on all flights arriving or departing the EU. This is curious logic, as it means that extra weight that reduces cost is treated differently to extra weight that increases revenue (passengers and cargo), despite both resulting in more emissions.
https://mises.org/mises-wire/eu-has-new-airline-regulations-and-consumers-will-pay
