Billionaires to be given free carbon allowances to offset green tax on private jets

Corporate jets owned by very rich people and large companies will be given some
free carbon permits under the ETS when it starts in January. Some 200 corporate
jet owners will benefit. Flying Lion, the company used by Lord Ashcroft, will
initially get 24 allowances per year worth €240 at today’s prices (€10 each).
DECC said aircraft operators had to submit flying data this spring to qualify
for relief of up to 85% of their total bill by free allowances in the 1st year.


11.10.2011 (Telegraph)

by Rowena Mason

Corporate jets used by billionaires the Duke of Westminster and Lord Ashcroft
are among the aircraft to be allocated free “carbon allowances” to offset the
cost of a new green tax.

Corporate jet owners will be able to take advantage of free carbon allowances,
potentially selling them on for cash if they don’t use their aircraft as much
as in previous years

Almost 200 corporate jet owners, from oil company ExxonMobil to Starbucks and
Iceland Foods, will be awarded free permits to compensate them for the new expense
of Europe’s carbon trading scheme for aircraft.

The emissions trading scheme means airlines will have to surrender a permit for
every tonne of carbon dioxide they emit, which is expected to raise the cost of
flying for millions of passengers.

Bigger airlines, such as easyJet and British Airways, have long been preparing
for huge bills from the emissions trading scheme.

They will get a large number of free allowances in the first few years of the
scheme to protect their businesses from becoming uneconomic.

However, corporate jet owners will also be able to take advantage of these free
allowances, potentially selling them on for cash if they don’t use their aircraft
as much as in previous years.

Flying Lion Ltd, a company used by Lord Ashcroft, which has flown Conservative
politicians around the world, will initially get 24 allowances per year worth
€240 (£207) at today’s prices.

However, the value of each permit is variable and is expected to rise significantly
after the scheme comes into force in 2012.

The list of approved operators also shows that the Duke of Westminster, one of
Britain’s richest men, is getting 28 allowances in the first year, worth €280
at today’s prices.

A spokesman for the Duke of Westminster said: “We are aware of the forthcoming
legislation and that it includes private planes such as the one owned by the Duke
of Westminster.

“We are considering how best to handle participation in carbon trading but are
not yet in a position to give any detail.”

Alan Kilkenny, spokesman for Lord Ashcroft, said: “Although he flies in planes
owned by Flying Lion on a regular basis his relationship with Flying Lion is at
a distance. He would be unaware of this.”

The Department for Energy and Climate Change said operators of aircraft had to
submit flying data this spring to qualify for relief of up to 85pc of their total
bill through free allowances in the first year.

The emissions trading scheme has severely angered foreign airlines, leading British
Airways boss Willie Walsh to warn that Europe risks angering US and Chinese companies.

American airlines have been trying to argue that they should be exempt from the
scheme, according to international law.

However, last week, the European Union’s advocate-general, Juliane Kokott, issued
an opinion that including foreign airlines in the scheme is legal.

It is likely that airlines will pass on the cost of the scheme to their customers,
who are already facing an increase in Air Passenger Duty.

Meanwhile, politicians were accused of being “schizophrenic” and “inconsistent”
about green policies for business in two separate attacks.

Neil Bentley, the CBI’s deputy director-general, said companies were committed
to tackling climate change, “but investors are struggling to understand how to
invest against the proposed framework while the resulting costs could damage parts
of our manufacturing sector”.

On Monday, a report from the Environmental Audit Committee blamed the Government
for moving goalposts by reviewing the UK’s green targets. It said the “Government’s
somewhat schizophrenic attitude to climate change seems to be undermining confidence”.

http://www.telegraph.co.uk/finance/newsbysector/transport/8818995/Billionaires-to-be-given-free-carbon-allowances-to-offset-green-tax-on-private-jets.html

 

and

Free carbon allowances for Billionaires

11 October 2011

In order to offset the cost of Europe’s carbon emissions trading scheme, corporate
jets will be allocated free carbon allowances. Today’s Daily Telegraph reports
that private jets used by billionaires Lord Ashcroft and the Duke of Westminster
are among the aircraft to be given allowances.

The newspaper stated that nearly 200 corporate jet owners including oil company
Exxon Mobil, Starbucks and Iceland Foods, will be given free permits to compensate
them for the new expense of Europe’s emissions trading scheme.

Airlines will now have to surrender a permit for every tonne of carbon dioxide
they emit, which is expected to raise the cost of flying for millions of passengers.

Passenger carriers such as British Airways and EasyJet have been anticipating
multi-million pound bills from the emissions trading scheme, dubbed a ‘green tax’
by the Telegraph.

A number of free allowances will be issued in the first few years of the scheme,
in order to protect their businesses from becoming uneconomical.

However, corporate jet owners will also potentially be able to take advantage
of these free allowances, selling them on for cash if they do not use their aircraft
as much as in previous years.

The Telegraph reported that Flying Lion Ltd, a company used by Lord Ashcroft
(which has flown Conservative politicians around the world) will initially get
24 allowances per year worth €240 (£207) at today’s prices.

Meanwhile, the Duke of Westminster, one of Britain’s richest men, is getting
28 allowances in the first year, worth €280 at today’s prices, said the report.

http://news.directline-holidays.co.uk/Free-carbon-allowances-for-Billionaires-General-Travel—Tourism-829

 

There are a great many comments after the article, most of them (as usual) not
worth looking at but this one comes from someone opposed to this article, and
from the private jet industry, putting their point of view:

This is the single most sensationalist piece of journalism I have ever come across.
It makes no false statements, but leaves much unsaid as to the reasons and implications
of how the scheme works, and how it will affect these ‘billionaires’.

Firstly, this article makes no mention of the operators who get 2 allowances
each year…yup 2! Nor does it mention that, as the UK Environment Agency is the
only regulator in the EU to charge to claim allowances, many business jet operators
didn’t bother to claim them. It also doesn’t make it clear enough that these free
allowances don’t cost the tax payer a single penny.

While it is true that people who operate business aircraft will get some allowances
for free, the percentage they will receive for free are a fraction of the amount
they will need to surrender. The reason for this is that they have been awarded
on the basis of tonne-km data, which is intentionally skewed towards those who
move a greater payload and therefore, by design, is against business aircraft.

So if someone flies in their private 737 from London to Paris, with one person
on board, and Ryanair fly the same route with 180 people on board, they will get
180 times more allowances, even though both are emitting roughly the same amount
of CO2 doing so. In this way, it rewards (and therefore encourages) people to
swap their private flight for a Ryanair one, and makes the ones who chose not
to pay. I fail to see anything unfair in this?

In fact, if you compare a Gulfstream to an ATR-72 flying London to Paris the
Gulfstream will have to pay for about 92% of their allowances, whereas the ATR
will only have to pay for 25% – if you assume they are both about 75% full (which
is the target for airlines, and business jets will usually be lower).

Both operators are facing the same rules, and the only way not to award free
allowances to the billionaires, would be to only offer them to airlines – but
then how do you define an ‘airline’?

Most business jets are operated by companies – either for charter or on behalf
of a beneficial owner. They follow the same rules as airlines in all other senses.
It would also be harder than you think to pass these costs onto the ‘billionaires’
at the current rate of free allowances, as they already operate in a competitive
market place, and absorbing the costs would also be difficult, as they operate
on thin margins. I suspect many of these will go out of business as a direct result
of the scheme (unlike Ms Mason, I have actually done the maths on how much this
is going to cost these sorts of companies).

The people who run the ops departments, clean, fuel & maintain the planes, work
in the accounts departments, clean the offices and even those who fly the planes,
are not billionaires. This sort of ‘they have more than me, so they must be punished’
attitude towards business aviation is not fair on the many hard working people
in the sector.

The economic activity which is driven by this industry is significantly greater
than the 2% of the total global emission from aviation (which in turn is 2% of
that…so 0.00004% of global human CO2 emissions). Supporting this industry is
good for more people, and good for the tax payer. Even if it is more fun to attack
these people.

By Gill Plimmer

Private jet businesses in the UK are braced for the introduction of a tax on
flights, expected to come into effect in April 2012.

Many private jets have until now escaped air passenger duty charges, which apply
only to aircraft with a takeoff weight greater than 10 tonnes or those carrying
20 or more passengers.

As an illustration, the nine-seat, 1,858 nautical mile range Cessna Citation
XLS+ has a maximum takeoff weight of 9.18 tonnes. The same US aircraft maker’s
nine-seat, 2,847nm-range Citation Sovereign has a maximum takeoff weight of 13.77
tonnes.

But under rules being considered by the coalition government, the threshold may
be lowered to 5.7 tonnes, which would include most business jets.

From the current jet range of Cessna, the world’s leading business jet maker
by volume, only its five-seat, 1,150nm-range Citation Mustang (3.9 tonnes) and
8-9-seat, 1,613nm-range CJ2+ (5.68 tonnes) squeak under this limit. Cessna’s 7-8
seat, 1,875nm-range CJ3 (6.3 tonnes) and 8-9-seat, 2002nm-range CJ4 (7.7 tonnes)
are heavier than the cutoff.

However, emergency services would be excluded under the proposals, which are
out for consultation until June 17.

The so-called Learjet levy will affect more than 67,000 private aircraft flights
in the UK each year. Until now, these flights have not been subject to air passenger
duty despite travellers on commercial airline services having to pay duty of about
£12 ($19) for short-haul journeys and up to £110 for long-haul flights. The new
rules would extend this to almost all air passengers.

The proposals in the UK are in contrast to moves in the US, where Congress introduced
in 2009 a tax break to help businesses buy their own aircraft. Although there
are some calls for the benefit to be withdrawn, Dan Hubbard, spokesman for the
National Business Aviation Association, says the market in the US, the largest
single market for business aircraft, is still far from recovered. “Manufacturers
tell us we still need it,” he says..

But the move in the UK has divided operators, with some saying it is fair to
bring private jet travel into line with commercial airlines and others believing
it is an undue burden on business aircraft operators, which typically each only
have a few aircraft.

The European Business Aviation Association is one of the more vociferous opponents
to the introduction of the tax, warning that the levy could force aviation companies
offshore.

“In Europe, 40 per cent of business aircraft operators have only one aircraft
and 80 per cent have fewer than five, so applying the air passenger tax to this
diverse sector would have a significant negative impact on the very small and
medium-sized enterprises the UK government and the European Union are pledged
to support,” the Brussels-based association says.

George Galanopoulos, managing director of London Executive Aviation, points to
the hefty administrative burden involved, with the industry already coming under
pressure from new emissions guidelines and higher fuel and VAT bills.

“It’s going to cost us more to collect the data and pay the tax than the government
will get from it,” he says. “The government has to realise it is not just pop
stars or City people flying around. The majority of our flights are business and
they bring investment. These are business people who need flights to remote parts
of the world for two hours, then they need to come back and do more business.”

But others are more resigned to the tax. Alex Berry, group executive sales and
marketing director at Chapman Freeborn, the world’s biggest charter company by
revenue, says the levy is equitable. “There’s no reason why a person going on
a private jet to Malaga shouldn’t pay tax, while a family of four going on holiday
should.

“Our customers are not going to stop flying because of the cost – £30, £40 or
£50 a trip. It’s a nominal cost compared with running an aeroplane.”

He adds that private jet operators are likely to pass on the cost to passengers
rather than bearing the price themselves, which should should ease any increase
in pressure on the operators themselves.

Some analysts agree. “Given that chartering even a small private jet can cost
approximately £10,000 per hour, the level of air passenger duty charges imposed
by the chancellor would have to be quite high for demand to be negatively affected,
in our view,” says Adrian Murray of Oriel Securities.

The UK Treasury says that submissions during the consultation period that ends
next month “will be considered before any final decisions are made”.

This raises the prospect that the tax change could still be derailed. In the
UK, Gordon Brown, while prime minister, was forced to back down after initially
trying to raise aviation taxes. And there is a parallel move in the US, where
the Democrats are facing hefty opposition from Republicans to their attempt to
end the tax exemption on private jets.

http://www.ft.com/cms/s/0/01e5040c-7f57-11e0-b239-00144feabdc0.html#axzz1d1Dmac7x