Dutch government announces climate conditions for KLM bailout, rare in other government bailouts

The Dutch government on Friday said a multibillion-euro bailout for KLM, the country’s national carrier and one-half of the Air France–KLM group, will have green strings attached, in a bid to cut the emissions of a sector that has proved notoriously difficult to decarbonize.

The 3.4 billion–euro ($3.8 billion) bailout will require cuts to dividends and jobs, alongside a one-fifth reduction in evening flights, in part to encourage rail journeys, as well as a requirement to reduce emissions per passenger by half by 2030. Those conditions come on the heels of similar restrictions for Air France, which received a 7 billion–euro ($7.9 billion) bailout from the French government, including a requirement that domestic flights be cut by 40%. The airline had already committed to reducing emissions per passenger by 2030. Pre-pandemic, both governments held individual stakes of about 14% in the company.

The idea of attaching “green strings” to government bailouts for sectors that struggle to decarbonize has been cited repeatedly by climate advocates, including former Bank of England governor Mark Carney, now a United Nations adviser. But despite the EU’s overarching commitment to build a “green” recovery from the COVID-19 pandemic, as well as its pre-pandemic commitment to reduce emissions to net zero by 2050, the Dutch and French bailouts are outliers—not the norm.

Lufthansa, the continent’s largest carrier, will receive a 9 billion–euro ($10.1 billion) bailout from the German government, without climate strings attached. Besides Air France–KLM, only Austrian Airlines, a national subsidiary of Lufthansa, will face climate conditions for its government bailout, mainly focused on reducing flights for destinations that could be reached by train within three hours, according to a tracking project from Transport & Environment, Greenpeace, and Carbon Tracker. Aid to airlines in the U.S. does not include climate conditions.

Though Amsterdam and Paris are key international travel hubs and tourist hotspots, the continent also has a vast network of budget tourism, fueled by cheap, convenient flights. But as continent-wide lockdowns kept people at home over the spring and into this summer, the impact on the region’s carriers was immediate, nearly eliminating air travel, with most carriers requesting government assistance. There are strong signs that the industry won’t recover to pre-pandemic levels for years, if ever. This week, scheduled flights out of France were down 83% compared with last year, according to flight data provider OAG.

Though global emissions are expected to be sharply down this year as a result of the lockdowns and ensuing economic crisis, aviation is still one of the most intractable sticking points in plans to dramatically lower emissions. Though the sector, pre-pandemic, made up less than 3% of total energy-related emissions, and though design efforts have made planes dramatically more fuel-efficient over the decades, individual flights are incredibly carbon intensive.

An EU study found that flying was eight and a half times as carbon-intensive as rail travel, the least carbon-intense means of travel, and a study from the University of Michigan found that a single roundtrip flight from San Diego to Frankfurt was equivalent to driving a light-duty vehicle for an entire year.

Meanwhile, there are few viable options to decarbonize planes: Biofuels remain expensive and niche, and there are no large-scale, commercially available electrified planes. Beyond developing alternative fuels and researching electric planes, the simplest way to reduce aviation emissions is simply to make flying more expensive and less convenient, largely through a combination of taxes, including on jet fuel, which is currently untaxed, and limits on short-haul or domestic flights.

Not only are their routes already covered by extensive European rail links, shorter-haul flights are typically more carbon-intensive per kilometer because a large proportion of the plane’s fuel is burned during takeoff and landing.

Even industry associations have said that the sector must find a way to dramatically lower emissions. A joint letter by 13 European-based aviation associations, including the International Air Transport Association (IATA), to EU ministers and EU commissioners said that “air transport must be at the very core of the strategy the EU is charting for its recovery.”

The letter called for the development of sustainable fuels, incentive programs to scrap older and less efficient aircraft, and public investment in research, though it stopped short of advocating taxes or bans on domestic flights.

But both climate change and COVID-19 threaten the long-term future of aviation, albeit on different time scales, argued Dan Rutherford, the program director for marine and aviation at the International Council on Clean Transportation, in a recent post.

With a carbon price of even $40 per ton, a number backed by the conservative-leaning Climate Leadership Council and businesses like IBM, airlines would become loss-making, he argued.

“Today, airlines face a short-term liquidity crisis triggered by the coronavirus and a long-term solvency challenge from climate change,” he said. “To succeed, public bailouts need to address both.”