New report warns that legacy airlines are lobbying against climate package while publicly supporting net zero targets.
Legacy European airlines continue to oppose the EU’s climate legislation, with companies like Air France KML leading those resisting, while low-cost airlines such as EasyJet and Ryanair are driving support for climate policy, according to a new report.
In its analysis of over 350 examples of climate policy engagement from the aviation sector in the last year, think tank InfluenceMap revealed that anti-climate change lobbying was impacting progress on Paris-alignment.
Against the backdrop of the EU’s ‘Fit for 55’ package, legacy airlines like Air France, International Airlines Group (IAG) and Lufthansa, have been supporting 2050 net zero ambitions publicly while opposing actions driving these targets behind the scenes, particularly in regard to regulation concerning international flights.
Documents obtained via an InfluenceMap freedom of information request revealed IAG – which owns British Airways and Iberia – had emailed a European Commission official in January advocating for the region’s sustainable aviation fuels (SAF) mandate to be restricted to domestic EU flights.
As per its climate protection package, the EU has set a target of having at least 63% of all aviation fuel for flights from EU airports, using SAF.
Meanwhile, in an email to the Commission, Air France KLM wrote it was “not supporting the introduction of a kerosene tax” which had been proposed, based on its energy content. The tax would operate transitionally over ten years from 2023.
According to Lucca Ewbank, InfluenceMap’s Climate Change Analyst and author of the report, investors have much to be concerned about, from an individual company level to broader implications for the wider economy.
Ewbank explained that some investors might view lobbying activity as a “forward-looking indicator of company management thinking”.
“Given governments are expected to continue to move towards regulating polluting industries in line with the Paris Agreement, those companies that are basing their strategies on a perceived ability to water down or delay this regulatory process will more likely be seen as risky investment,” she said.
Low-cost airlines have taken positive stances, according to the report, with EasyJet, Wizz Air and Ryanair advocating for inclusion of flights outside the European Economic Area in the EU Emissions Trading System (ETS), the EU’s cap-and-trade scheme that places limits on rights to emit pollutants, and its SAF mandate.
Last month, EasyJet and Ryanair commissioned a report emphasising that restricting climate measures to flights within the EEA would “jeopardise 73% of emissions savings”.
Ryanair CEO Michael O’Leary recently lobbied EU member states and Commissioner Frans Timmermans to support the EU Parliament’s plenary vote to extend the EU ETS to flights departing from the EEA.
The fact that previously state-owned companies are attempting to leverage their political ties to influence the regulator on issues, while publicly holding a different position, is another potential area for attention among investors.
“Another area of heightened concern relates to the issue of governance – or lack thereof – of a company’s policy engagement practices, especially when these relate to business-critical issues such as climate change policy for the aviation sector,” said Ewbank.
She added that, at a broader level, institutional investors operating globally may be put off by companies or sectors holding back the energy transition, and its “knock-on effects” for the wider economy.
“This might come in the form of increased regulatory stringency for other sectors as policymakers attempt to keep the Paris Agreement targets within reach. Alternatively, it increases climate risk in general that accumulates if the Paris Agreement’s temperature goals are missed,” she said.
Earlier this year, a group of institutional investors launched a new disclosure standard designed to ensure investee companies’ climate change lobbying aligns with the goals of the Paris Agreement.
The standard introduces a 14-point plan which requires corporates to assign responsibility at a board level for oversight of climate change lobbying, and publish an annual review covering the company’s assessment of its lobbying activities.