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Accelerating the UK’s Road to Jet-Zero

11 Jul 2022

Can market-based measures and fiscal policy help decarbonise aviation?

As travel restrictions continue to ease, air travel is taking off in the UK - albeit with disruption and delays as airports gear up for the expected demand. With aviation accounting for 7% of the UK’s total carbon emissions, a new PwC report - Road to Jet-Zero - outlines the range of support measures needed to ensure future journeys are even more sustainable.

An engine of the global economy, the UK is the third largest aerospace market in the world and second largest in Europe, contributing £35 billion to UK GDP. The report outlines the vital role the sector plays in the UK’s transition from a fossil fuel based economy to one primarily powered by renewable sources, and in delivering on the ambitious goal of net zero greenhouse gas (GHG) emissions by 2050. 

It sets out how this journey will need additional market based measures (MBM) alongside fiscal policy if the sector is to decarbonise at scale. Accounting for 1.9% of GHG emissions globally, the UK sector accounts for as much as 7% of total carbon emissions, a discrepancy that highlights the urgency in the government’s decarbonisation targets. 

This has been reinforced by the Jet Zero Consultation aimed at accelerating the design,, production certification, infrastructure and operation of zero emission aircraft and aviation systems However, according to the UK’s Sixth Carbon Budget, it is unlikely that even the most optimistic scenario in which the UK achieves net zero in 2042 with a reduction of 87% by 2035 could be delivered across the board. 

Amal Larhild, PwC UK Environmental, Social and Governance Tax leader and author of the report, says:  

“Almost three million people took to the skies from the UK in January and this number will rapidly increase as travel restrictions ease world-wide, with global industry figures suggesting 4 billion1 people will embark on commercial air travel by 2024. If the UK is to meet its ambitious targets of net zero emissions by 2050, it’s clear that we will all need to substantially re-evaluate and adjust the ways in which we live, and this includes how we travel both around the UK and internationally.  

“The aviation sector is fully onboard with this journey, however there is no single policy measure in place that is sufficient enough to support them in this climate transition challenge. It’s vital that a combination of measures that can best balance the costs to the industry and consumers with the environmental benefits of decarbonisation is secured swiftly. Without it, aviation may fail to get far enough off the ground to make the impact required or expected by their passengers and investors.”

Achieving net zero emissions by 2050 in the UK aviation sector will require significant and sustained investment. A report from the Office of Budget Responsibility, for instance, finds that the net cost of the UK reaching net zero by 2050 to be £321bn, or just over £10bn per year.

According to the Road to Jet Zero report, fiscal policy in addition to MBMs like emissions trading schemes (ETS) or carbon offsets will be helpful in supporting decarbonisation in the aviation sector by aligning industry, government and community interests. When taken together the two policy interventions leverage innovative technologies, trade, investment, tax, and regulation to create the conditions for long-term GHG reductions and sustainable aviation. 

Diane Shaw, PwC UK Aerospace, Defence and Security Consulting leader, commented:    

“By implementing the right combination of proportionate, targeted, and complementary policy tools from design through to commercial operation, governments can support the aviation industry in reaching its long-term decarbonisation goals.

“There is an imperative to accelerate sustainable research and development innovations as well as improvements across manufacturing, operation and retirement phases but this must be done alongside incentivising meaningful shifts in the behaviours and choices of consumers, airlines and aerospace manufacturers. The two must go hand in hand if we are to gain traction quickly.

“By providing subsidies for successful innovations in sustainable R&D, manufacturing, operations, sales and retirement, governments can become trusted partners with industry, consumers, and the wider community on the collective journey toward sustainability and jet-zero.”

 

Notes to editors:

  1. IETA air passenger number predictions

Find the Road to Jet-Zero report here. 

It outlines the following key findings to support the sector’s decarbonisation journey: 

  • A combination of MBMs and fiscal policy can help bridge the decarbonisation gap, balancing economic costs and environmental benefits

  • Fiscal policy design should consider the implications of an aircraft's lifecycle across the value chain

  • MBMs and fiscal policy should result in a sustainable balance between community, public and private sector objectives
  • Government-industry collaborations can unlock more efficient outcomes by leveraging their respective strengths

 

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