Treasury analysis shows ticket prices expected to go up across board with no plans for frequent flyers to shoulder more of the cost
Rachel Reeves’s bid to expand Heathrow airport could add £40 to the cost of an airline ticket, according to the Treasury’s own analysis.
The chancellor’s proposal to minimise the carbon emissions of a bigger Heathrow include the use of sustainable aviation fuels, which experts say are expensive and unlikely to reach the scale needed for aviation expansion.
A Treasury cost-benefit analysis seen by the Guardian shows that sustainable fuels could increase the cost of a single economy airline fare by £37.80 by 2040. There are no plans to ensure frequent flyers, or those in first or business class, shoulder more of the cost, with ticket prices expected to go up across the board.
The chancellor drew up the climate plans in response to criticism from the energy secretary, Ed Miliband. He is understood to have warned cabinet colleagues that airport expansion is likely to put the UK in breach of its legally binding carbon budget, which keeps the government on track to meet its 2050 net zero emissions target. One senior source said Reeves had been “gung ho” about Heathrow since the summer and had been putting pressure on Miliband and the former transport secretary Louise Haigh.
A number of cabinet ministers have been reassured by the proposal from the chancellor to include plans to use sustainable fuels. However, others fear it is prioritising short-term economic growth over tackling the climate crisis, which has been shown to be likely to tank economies, with more frequent natural disasters that destroy infrastructure, homes and the food supply.
Reeves told journalists at the World Economic Forum in Davos on Wednesday that she views economic growth in this parliament as more important than net zero. Asked to choose between the two, she said: “Well if [growth is] the number one mission it’s obviously the most important thing.”
There is some scepticism in Whitehall and beyond about the degree to which airport expansion would make a contribution to economic growth. The Department for Transport under Haigh commissioned a study on the growth impact on a third runway at Heathrow, which indicated that any increase in economic growth would not be immediate as the airport would not see any additional planes until 2040. The biggest rise in passengers would also come from transit – where there is no air passenger duty paid.
Reeves is understood to have told cabinet colleagues that boosting the amount of sustainable fuels airlines are mandated to use will offset any emissions. But Alethea Warrington, the head of aviation at the climate charity Possible, said: “For the government to try to claim that so-called ‘sustainable aviation fuels’ can undo the climate harm caused by new runways is a fantasy. The supply of genuinely sustainable fuels for aviation will be extremely small, and nowhere close to sufficient to supply even aviation’s current demand, let alone new runways. Any higher costs should fall on frequent flyers and those who can afford to fly in first class, rather than on the majority of people, who already fly rarely, if at all.”
The Treasury’s analysis states that 75% of the costs of using more sustainable aviation fuel (SAF) will be passed to the consumer. The officials drawing up the document accepted this, writing that plane tickets are not expensive enough: “Ticket prices do not reflect the full social cost of flying and are not sufficiently incentivising the uptake of decarbonisation solutions such as SAF.”
At the moment, planes use highly polluting kerosene for their jet fuel. They can reduce their emissions by up to 80% using biofuels made from feedstocks, cooking oils or crops. However, this takes up huge amounts of land and uses crops for fuel that could be used for food instead. Recent research from the Royal Society has found the UK would have to devote half its farmland or more than double its total renewable electricity supply to make enough aviation fuel to meet its ambitions for net zero flying. Last year, Air New Zealand scrapped its 2030 decarbonisation target, blaming difficulties in securing sustainable jet fuel.
Alex Chapman, a senior economist at the New Economics Foundation, said: “We need emission reductions across the economy now and aviation cannot be given a get-out-of-jail-free card on the basis of unsustainable fuels and shaky arguments of growth. Instead of unsustainable aviation fuels, the government should look to managing the demand for flying through ideas such as a frequent flyer levy.”
Most cabinet ministers who previously voted against airport expansion are understood to be prepared to accept the growth of the four London airports. Seven cabinet ministers, including the prime minister, Keir Starmer, have voted against expansion in the past as well as others including the environment secretary, Steve Reed, and Darren Jones, the chief secretary to the Treasury.
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