Source: The airline industry relies on business travel for as much as 75% of its revenues on some flights, giving companies unique leverage to transform it, Nora Lovell Marchant, Fortune, September 15th, 2023
The transition from fossil fuels to low-and-zero carbon assets and technology that’s currently underway represents the largest reallocation of capital in human history. Our economy is fundamentally and rapidly changing, and many business models will struggle if they survive at all. One solution is to emphasize macroeconomics by internalizing the externality of carbon.
Putting a price on carbon, specifically through the business travel function, is a smart way to navigate this transition and help future-proof businesses. Funds from carbon pricing can be used to create self-sustaining budgets for decarbonization efforts such as investing in sustainable aviation fuel, electric vehicles, renewable energy, and research and development, an approach that will resonate with executives, employees, investors, and consumers. Given today’s rapidly evolving landscape, that’s a real competitive advantage.
Why business travel? Because it’s an easy place to start. While business travel is not responsible for most corporate emissions, 85% of the largest global companies report travel-related emissions because they’re easier to measure than other indirect (scope three) emissions like investments or waste. That measurability helps businesses assess impact in many different ways, like the number of trips or amount of carbon combusted. A business could assess a flat fee on all flights or a dynamic fee dependent on carbon per flight. Long-haul first-class flights and short-haul economy flights would exist on opposite ends of the spectrum. Those funds could be invested in carbon reduction initiatives.
Business travelers make up 12% of airline passengers–but an impressive 75% of revenue on certain flights. Given the unique concentration of the business travel community, corporations with a business travel footprint are uniquely positioned to lead the charge on carbon pricing, and to make a global difference: The world can’t rely on individual leisure travelers to collectively make micro-decisions to decarbonize the aviation industry.
Carbon pricing is transforming theoretical support for embedding sustainability into tangible financial resources. At American Express Global Business Travel, we facilitate carbon pricing on point-of-sale travel transactions. Other companies are experimenting in similar ways. For instance, Microsoft has detailed its changes to carbon fees, announcing that “the scope 3 business travel fee will increase to $100 per metric ton of carbon dioxide equivalent in our next fiscal year to better support the purchase of sustainable aviation fuel.”
Putting a price on carbon is the most powerful and effective lever to incentivize economic decisions in the travel space and beyond. By instituting a travel transaction fee, businesses can create a funding vehicle that stimulates clean technology and market innovation, fueling a future of growth decoupled from carbon.
For all these reasons, carbon pricing by way of business travel can help shift companies–and the aviation industry at large–towards a more sustainable future.