Air Travel And Climate Change: KLM's “Fly Responsibly” Campaign
The airline industry is in a bit of trouble over the climate issue.
In the US, carbon emissions rose in 2018 after declining for 3 years, and emissions attributed to aviation increased by 1.7 % since 2017.
Air travel continues to expand worldwide; by some estimates, 7.8 billion passengers are likely to travel in 2036, as opposed to 4 billion in 2017. A near-term technological breakthrough to solve emission problems such as an electric or hybrid airplane does not seem plausible. Of course, airlines could modernize their fleets and switch to more fuel-efficient planes, as many have done. They could also rationalize routes and use biofuels. These supply-side interventions alone probably will not solve emission problems. Some demand-side interventions are also needed.
But why is the demand for air travel growing? In addition to rising income and the desire to brag about travel to exotic destinations on social media, people travel because it is affordable. Cheap air travel might be due to government subsidies and the ability of passengers to externalize emission costs associated with their travel.
To reduce the demand for flying, one could simply fly less and use, say, trains instead. Another way is to increase ticket prices, either by imposing a travel tax (as France has recently announced) or motivating passengers to voluntarily buy carbon offsets. KLM is trying these strategies in its effort to become a climate leader.
KLM’s Fly Responsibly Campaign
KLM recently launched a campaign called Fly Responsibly. The website notes: “Fly Responsibly is KLM’s commitment to taking a leading role in creating a more sustainable future for aviation. With the introduction of Fly Responsibly, we’re making the world aware of our shared responsibility. We can only succeed if we work together, so join us today for a more sustainable tomorrow.”
KLM notes that customers can do three things. First, they could reduce air travel by considering alternatives such as trains, which may also save time. For example, the campaign notes that: “Do you know that flying from Amsterdam to Brussels takes longer than going by train?”
Second, the airline wants its customers to travel smart by packing light. Of course, it could increase luggage fees as well, but it has chosen not to do so.
Third, KLM is urging passengers to voluntarily purchase carbon offsets over and above the ticket price.
Conceptually, the KLM campaign can be viewed as a “nudge.” Psychologists, and now behavioral economists, suggest that actors do not always make the best choices from the societal perspective and sometimes not even for themselves. However, they might do so if nudged. According to Sunstein, nudges are “choice-preserving approaches that steer people in a particular direction, but that allow them to go their own way.”
The KLM campaign nudges travelers in different ways. It discloses information that can allow passengers to reap private benefits (like saving time by taking trains). It also provides low-cost ideas, such as packing light, to reduce emissions, a global public good. Finally, for passengers who cannot replace air travel by some other travel mode, it provides information to reduce passengers’ cost of finding and purchasing carbon offsets.
Is KLM becoming a nanny? Is it destroying choice?
On nannying and nudges
Think of situations when the consumer bears substantial personal costs for consuming a product. Most of us love eating chocolates or ice cream, and it is ok for personal health to eat in moderation. However, too much sugar is detrimental to personal health.
For governments, there is an externality component as well: the public health crisis. This probably motivates governments to launch social awareness campaigns or adopt policies such as reducing access to sugary drinks in schools (they could also tax sugar, but then this would probably not be termed as a nudge).
Although some nudges create private benefits for consumers, libertarian critics might term this a “nanny government.” This sort of criticism is cultural (maybe ideological), not economic. For libertarians, a nanny government does not trust individuals to make informed choices. They find this lack of trust in citizens to be unacceptable and undemocratic.
KLM’s “ride the train” argument could be interpreted as nannying. Unreformed rational-choice advocates might say that people are always rational. For them, there is a rational reason why an individual wants to fly as opposed to taking the train. In contrast, a psychologist or behavioral economist might say that people sometimes fly because they do not have information about train travel times. They might see KLM as simply wanting to motivate travelers to search for this sort of information themselves.
But Why Should I Consume Less if Others Pick Up My Costs?
Moving beyond the nannying debate, more difficult problems arise when our consumption is restricted to predominantly help “others.” The challenge in this externality problem is to come up with a system so that consumers pay the full price of the product, including the negative externality cost. This is sometimes called the Pigouvian approach. This could be done via a government mandate such as a tax. But it could also be done voluntarily. Customers can do something about it at an individual level, and firms or industry associations can adopt new policies.
This is where KLM’s campaign comes in. It is urging voluntary action from air travelers about the externality their travel causes. Instead of merely urging them to purchase offsets, KLM provides a low transaction- and search-cost vehicle on its portal. Travelers do not have to worry about calculating their carbon footprint or search which offset vendor is credible or how their offset money will be spent. KLM is providing this service free of charge.
Economically, purchasing offsets should not be a big deal for travelers because offsets are a small fraction of the ticket cost. For example, as per the KLM website, flying economy from Seattle to Amsterdam and back could cost anywhere between $1600-$2500, depending on the day/date of travel. The cost of a carbon offset is $14.62 – less than 1%!
Culturally, offsets might be a bigger deal for travelers. They might react negatively because they do not want to be told that what they are doing (flying) is bad or be punished for doing what they think is a legitimate activity. We know from personal experience that some academics get angry when we talk about buying carbon offsets for traveling to academic conferences.
What Motivates KLM to Launch this Campaign?
KLM might simply be a step ahead of impending regulations. France has announced it will impose an air travel tax. The International Civil Aviation Organization, the United Nations specialized agency responsible for establishing civil aviation standards, recently voted for the Carbon Offsetting and Reduction Scheme for International Aviation, or ‘CORSIA’.
But this sort of proactive action may also have some economic payoff. KLM already has one of the more fuel-efficient fleets. If carbon offsetting becomes a law or the industry norm, KLM’s competitors will suffer.
The more intriguing dimension of KLM’s campaign is asking people to fly less. Companies may restrict the supply of their products to make them more valuable. Historically, De Beers, the diamond mining and trading company, carefully controlled the supply of diamonds. After all, diamonds are valuable because they are scarce. Excessive supply would reduce the product’s value.
De Beers could do this because it was a monopoly supplier of diamonds. But KLM is not the monopoly supplier of air travel; customers could always fly another airline.
Might reputational gains explain the story? Among the major international airlines, KLM is probably the first to ask customers not to fly on short-haul routes. This campaign has made a splash. Only time will tell how this will affect KLM’s reputation and profitability.