Tan Kin Lian - Perspectives Supply of green fuel to planes
The government will impose a green fuel levy on passengers taking an air flight from Changi from 2026.

The airport authority said that this levy is to promote the use of green fuel for aircrafts. Currently, the green fuel cost 4 times of the traditional fuel. The authority wants to buy green fuel in bulk and sell them to the airlines at the price of traditional fuel. The levy paid by passengers is to cover the difference in the price.

I find this arrangement to be puzzling. It creates a monopoly in the supply of the green fuel and the monopoly is funded by the levy.

It may be difficult to monitor the operation of the monopoly. It may be difficult to ensure that the green fuel is procured at the most competitive price in the market. There is the opportunity for corruption.

A better arrangement is to require the airlines to use green fuel. They can purchase the green fuel at the market price and reflect the higher cost in the ticket prices.

The airport authority can provide the green fuel at a competitive price due to bulk purchase, but it should not be given the monopoly.

Other competitors should be allowed to supply the green fuel.

Tan Kin Lian

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