Pricing strategies for green products/services typically are intended to reflect lower costs or, on the other end, a “greenium” – a price premium usually equating to higher margin/profit. But as compliance mandates proliferate, some companies face rising operating costs that they are passing on to customers. Lufthansa just announced an environmental surcharge “intended to cover part of the steadily rising additional costs due to regulatory environmental requirements.” These costly mandates include:
“the blending quota of initially two percent for Sustainable Aviation Fuel (SAF) for departures from European Union (EU) countries from January 1, 2025, adjustments to the EU Emissions Trading System (EU ETS) as well as other regulatory environmental costs such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
The Environmental Cost Surcharge applies to all flights sold and operated by the Lufthansa Group departing from the 27 EU countries as well as the UK, Norway and Switzerland. The amount of the surcharge varies depending on the flight route and fare and is between 1 euro and 72 euros. The Environmental Cost Surcharge will be levied on all tickets issued from June 26, 2024 and applies to departures from January 1, 2025. The exact amount of the Environmental Cost Surcharge is shown on the Lufthansa Group Airlines booking pages in the price details.”
I expect we’ll see similar price increases in other sectors and companies as costly compliance mandates become effective globally. Smart companies will use the compliance efforts to find new/hidden business opportunities that reduce operating costs and lower prices to customers. The sooner you start on compliance, the sooner you can find these competitive advantages in comparison to companies that wait.
Our members can learn more about the EU’s carbon management strategy here.
If you aren’t already subscribed to our complimentary ESG blog, sign up here for daily updates delivered right to you.
Photo credit: Mathias Weil – stock.adobe.com
