Bloomberg News

Airlines Flying on Clean Fuel Should Pay Less Tax, Branson Says

December 06, 2011

Dec. 5 (Bloomberg) -- Governments need to make it “very clear” that jet fuel made from sources such as inedible plants and organic waste aren’t taxed like regular fuel, said Richard Branson, founder of Virgin Atlantic Airways Ltd.

A push by governments to remove taxes levied on airlines if they switch to using clean fuel would provide “enormous encouragement to the airline industry” to invest further in biofuel companies, Branson said today in a telephone interview. Virgin already has invested in Gevo Inc. and Solazyme Inc.

The airline spends more than $2 billion a year on fuel and there is “billions and billions and billions” there for the taking by the clean energy industry, the entrepreneur said. The industry fuel bill was $139 billion in 2010.

“Governments need to make it clear that if it’s clean fuel it shouldn’t be taxed and if it’s dirty fuel it should be taxed and that seems to be the best way to speed things up,” he said. The International Air Transport Association, which estimates the aviation industry accounts for 2 percent of global carbon- dioxide emissions, set a target in 2007 to eliminate these emissions from air travel by 2050.

The Carbon War Room, a not-for-profit organization funded by Branson, today started a web and information site aimed at reducing the use of traditional jet fuels by as much as 50 percent. It will also play a role in talking to governments to try and push a “no-tax on clean fuel policy,” Branson said. “I think they will be knocking at an open door as it will be very difficult for governments to disagree with that,” he said.

‘Reduce Air Fares’

Aviation could move from being one of the dirtiest industries to being one of the cleanest rapidly, Branson said. He hopes that this can be achieved by 2020.

Virgin Atlantic, which in 2008 became the first airline to fly a plane using first-generation biofuel made from babassu nuts and coconut oil mixed with kerosene, plans in two to three years to fly planes using fuel made from waste gases from steel mills.

Over the next year it will work with LanzaTech NZ Ltd., which makes the fuel, to sign deals with aluminum and steel plants so they can roll out production “as fast as possible.”

There are about 1,800 tanks filling airplanes around the world with fuel so once there are two to three companies producing renewable jet fuel, it will be easy to supply them to the airline industry, Branson said.

Airlines on July 1 won approval from the U.S. technical standards body ASTM International to blend fuel from inedible plants and organic waste with traditional kerosene-based jet fuel. Since approval, Deutsche Lufthansa AG, Finnair Oyj and Air France-KLM Group have flown planes using the fuel.

ASTM is now testing fuel made from alcohols, and this is expected to be approved in 2013.

Renewable aviation fuel would provide competition to traditional jet fuel. “Ultimately if you have a competitor, we might be able to reduce costs and therefore reduce airfares,” Branson said.

--Editors: Randall Hackley, Tony Barrett

To contact the reporter responsible for this story: Louise Downing in London at Ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg in London at landberg@bloomberg.net


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