Tuesday, November 5, 2013

Carbon Taxes Will Be A Boost In Making the World Smaller

Environment is a limiting factor for economic growth dependent on fossil fuels. This type of economic growth is unsustainable as the planet warms up due to increasing greenhouse gases.

I've blogged earlier that S'pore Airlines will be ending its long haul commercial flight to New York via Newark airport due to high fuel prices later this month. As if high fuel prices are not enough, we will be seeing carbon taxes on air travel which will make air travel even more expensive.

Europe collecting $$ while helping to save the planet. More environmentally conscious than profit minded. Together as a bloc, it is an effective measure as Europe is an attractive destination for tourists. Many europeans are already using high speed rail to travel around as europe's rail network is significantly denser & better than america's car & aeroplane culture. Hence europeans have a good rail transportation as backup. It is non-europeans flying in who will bear the brunt of the airline carbon tax.

Even if we don't travel to Europe, food & merchandise flown out of Europe & onto our dinner plates & shelves/cabinets will be carbon taxed which we will be paying.

With europe spearheading the way, soon other countries may also start collecting carbon taxes on their airspace. Too bad for tiny SG with its tiny airspace. I seriously doubt the hybrid regime would impose higher airline carbon taxes to compensate for the tiny airspace as it would hurt tourism.

High Petrol Price in Europe & Japan = Good Public Transport
Americans will suffer for vacation in their country if their government impose an airline carbon tax since they got a lousy rail network compared to Japan, South Korea & China. Why does USA have a lousy rail & public transportation network? Because petrol prices are low, hence america is car-centric. The europeans have good rail & public transportation infrastructure because it costs more to drive.

Less $$$ to Travel Far Means A Smaller World
As high oil prices lead to higher food prices, there'll be less $$$ to travel. Fewer trips will be made & most people would travel to nearer places instead of faraway. In short, there'll be less ticket sales. S'pore Tourism Board chief said in an interview of doubling tourism's contribution to GDP from 4% in 2011 to 8% in the future. I'm afraid the doubling is going to be problematic.

Economist Jeff Rubin said that soaring operating costs & declining ticket sales will force many airlines into bankruptcy.

According to him, in order to offset mounting fuel costs:

  • Flights of half empty planes traveling to more remote secondary locations will be canceled.
  • Connecting to a regional hub will become much more difficult if you don't live in a major city.
  • Cost conscious airlines refocus on fewer but more profitable routes with much greater load factors.
  • Safety may be compromised as planes carry less emergency fuel. Lighter weight = less fuel consumption = costs savings. If passengers afraid to fly because of safety concerns---> less ticket sales = airline may go bankrupt

Impact on Sinkies & SG
Sinkies are especially hit hard with high fuel costs & airline carbon tax. Citizens in big countries have a big backyard for tourism whereas sinkies must take a flight out of this tiny island unless is via slow train up peninsular Malaysia.

However there is a bright side. With less $$ to spare with higher food prices resulting from higher oil prices, there'll be less visitors both local & foreign to the 2 casinos. If it is bad enough resulting in a few quarters of losses, the 2 casinos can shut down. Say goodbye to the hosts of gambling problems affecting society, crime & the growing infestation of pawnshops.

Soaring fuel prices --> World is becoming smaller.
Carbon taxes --> A boost in making the world smaller.

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