February 20, 2024
SINGAPORE – Plans to charge a levy on passengers departing Singapore so airlines here use greener jet fuel will not put the Republic’s status as a global aviation hub at risk, said International Air Transport Association (Iata) chief Willie Walsh.
That is because all major air hubs and airlines around the world are pursuing a similar agenda, and passengers will ultimately bear the cost of the aviation industry’s transition to net-zero emissions by 2050, he told a press conference on Feb 19.
Rounding up the second Changi Aviation Summit, which brought together more than 400 senior government officials and industry leaders, Mr Walsh said the only credible option available for aviation to decarbonise by 2050 is to pursue the widespread use of sustainable fuels.
Yet, such fuels are three to five times more expensive than conventional fuel, and this will be reflected in airfares, whether through a levy or airlines raising ticket prices.
“The cost of travel will increase… It just cannot be avoided,” said Mr Walsh, who heads the industry body representing 320 airlines, adding that carriers will pass on the extra costs incurred given the thin margins.
Singapore’s new green jet fuel levy will be imposed on travellers from 2026, as flights departing the city-state will have to use sustainable aviation fuel from that year.
The national target is for sustainable fuel to form 1 per cent of all jet fuel used at Changi and Seletar airports in 2026. The eventual goal is to reach 3 per cent to 5 per cent by 2030.
The money collected from the levy will go towards the bulk purchase of greener jet fuel that airlines need to meet these aims.
Mr Walsh, who is Iata’s director-general, called Singapore’s levy “unique”.
While the former British Airways chief is not in favour of levies and taxes, he said Singapore’s measures are designed to generate an “environmental improvement”.
“The manner in which it has been introduced… appears sensible at this stage,” he said.
“We have always argued that if there are to be taxes or levies on the industry for environmental reasons… the money from those initiatives should be set aside and ringfenced, and used solely for improving the environmental performance,” he added.
Mr Walsh warned, though, that increases in airfares will dampen the industry’s growth. He said governments can play a role by providing support to significantly increase green fuel production.
“What we want to see is see more facilities… greater volumes being produced, which should have a significant effect on the price that we’re seeing today.”
Industry players and experts largely welcomed Singapore’s move to lower aviation emissions, but some said the nation’s targets are conservative.
Japan, for instance, is looking to mandate at least 10 per cent sustainable fuel by 2030.
“Why can Japan and other countries have higher sustainable aviation fuel targets than Singapore for 2030? I think that’s a valid question,” said independent aviation analyst Brendan Sobie of Sobie Aviation.
He added that the new levy, combined with an existing government levy to fund the development of Terminal 5 (T5), could have an impact on Changi Airport’s growth.
“I was already saying Singapore needs to consider reducing its airport charges. Now I think it’s even more important to reduce them,” he said.
Passengers on flights originating from Changi Airport now pay $62.20 in airport charges, comprising a $43.40 passenger service and security fee collected by Changi Airport Group, an $8 aviation levy collected by the Civil Aviation Authority of Singapore, and a $10.80 airport development levy introduced in 2018.
From April 1, the passenger service and security fee will climb by $3, taking the total to $65.40. Departing transit passengers will continue to pay a $6 passenger service and security fee, and a $3 airport development levy.
With the new sustainable fuel targets and levy, National University of Singapore environmental economist Alberto Salvo said Singapore is trying to send a signal to fuel producers to scale up the supply of green fuel, which amounts to 0.1 per cent of overall jet fuel volume at the moment.
“In the grand scheme of things, it may be what is politically feasible at this point, but it is still timid given the climate damage caused by aircraft,” he added.
Asked about greenwashing at the same press conference on Feb 19, Transport Minister Chee Hong Tat said the Singapore authorities will track emission reductions from the use of sustainable jet fuel here and ensure they are properly certified.
Ms Ong Shwu Hoon, vice-president of Asia-Pacific fuels at oil and gas firm ExxonMobil Asia-Pacific, welcomed Singapore’s move to raise the adoption of sustainable aviation fuels.
At a panel discussion at the aviation summit, Ms Ong said ExxonMobil already aims to produce 40,000 barrels of lower-emission fuels daily by 2025 and 200,000 barrels by 2030. These fuels include sustainable jet fuel.
On the high cost, Ms Ong said a major challenge is the difficulty in securing and handling raw materials used to make fuels that are derived from living matter, and this requires heavy investments.
Mr Sami Jauhiainen, regional vice-president for renewable aviation at Neste, which produces sustainable jet fuel, said better visibility of long-term demand will speed up investments in greener fuel.
“The first steps can be small, but the energy sector requires a trajectory… not only in 2030, but beyond that.”