The idea of the carbon tax is not new but is still relatively little used, in the economy in general as well as within companies. However, some specialists see it as a major weapon for reducing greenhouse gas emissions: in collaboration with MIT, the organization Climate Interactive has created a climate simulation called EN-ROADS which makes it possible to virtually activate various levers to curb rising temperatures. It turns out that the most effective lever is a (very) high carbon price. So, what could a carbon tax in business travel look like?
Why a carbon tax?
As NASA climatologist Peter Kalmus writes, “Global warming is a failure of the market economy. Fossil fuels generate an additional cost for society (global warming, respiratory diseases, etc.), not included in the price of fuel”. More generally, negative externalities are never taken into account in the price of a good or in the calculation of GDP. Razing a forest, burning coal, emptying the oceans…all great ways to increase GDP. Even an oil spill is beneficial, since the costly cleanup will contribute to the rise in the sacrosanct indicator.
Many economists are therefore now looking into the creation of more global indicators that would take into account societal and environmental aspects in the definition of wealth. And for the environmental part, putting a price on carbon appears to be one of the preferred avenues.
In addition, a carbon tax for business travel would (partially) correct a situation that is now grotesque, since, let’s remember, at a time of climate emergency, kerosene is still not taxed…
What would it look like for business travel?
Today, the predominant logic is that of price and the famous “lowest logical fare”. On a Paris-Shanghai flight, we sometimes take a connecting flight to pay less. But if the direct flight emits 2 tonnes less CO2, isn’t that a data to be valued? Assuming that direct is €150 more expensive, and setting a carbon price of €100 per tonne, we can estimate that the “environmental cost” is €200 higher with online flight. So the “real” total cost (conventional price + environmental impact) of the trip is €50 more expensive for the connecting flight. Establishing an internal carbon price is therefore an excellent way to arbitrate between cost and carbon emissions.
This is the reason why LinkedIn has just introduced an internal carbon price of $60 per trip (and which should soon evolve into a price per ton of around $100). As its travel manager Leslie Hadden points out, “ it is time to no longer look at the price as the only tangible indicator, but to take into account environmental externalities “. She also believes that this tax is “ an excellent way to educate travellers, in order to make them realize the impact of their trip, and, ultimately, to travel less. It is also a good way to raise funds to finance sustainable development projects, within or outside our value chain. “.
Finally, by establishing an internal carbon price, we are potentially preparing for the future. It is possible (probable?) that in the near future, companies will have to pay for their CO2 emissions. This is already the case for energy companies in Europe (ETS system), and the system could soon be extended to the transport sector. And if the next step was a generalization of this tax to all companies?
A sometimes complex implementation
While the potential of the carbon tax is beyond doubt, its implementation can come up against a few pitfalls:
First, to be useful, the price of carbon must be high, around €100 per ton. Too low, it can give the false impression that a few euros allow us to be “neutral” and that our environmental impact is derisory. Moreover, this price must be totally decorrelated from carbon offsetting, the market price, which is often far too low today. Two carbon prices must therefore co-exist, one for compensation and the other for the internal tax.
Then, the collection of this tax can prove to be complex, the usual booking tools not necessarily being able to show it correctly, especially since the calculations of emissions, in general, are very approximate. It is therefore sometimes better to collect it a posteriori, after having calculated its emissions precisely (taking into account the type of aircraft in particular).
Finally, and this is probably the key point: we must create a collective momentum, generate internal support so that the interest of this tax is understood and adopted. The funds collected must be clearly marked so that everyone understands what this money will be used for – and besides, it is surely better to forget the term “tax” and prefer the notion of “contribution”.
To quote Leslie Hadden in conclusion: We want to create real support for this project. This tax should not be seen as a punishment, but as a contribution. This positive side is absolutely crucial for the success of this project as well as for the fight against climate change. “.