Should aviation fuel be taxed to combat climate change?
Should aviation fuel for domestic and international flights be taxed to combat climate change? Could such a tax be used to fund development aid? Are there viable alternatives?
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Flying is a major source of pollution, and in particular of greenhouse gases such as Carbon dioxide ...
Flying is a major source of pollution, and in particular of greenhouse gases such as Carbon dioxide and nitrous oxide. The role of aircraft in climate change is made worse by the high altitude at which gases and particulates are released into the atmosphere. It is thought that the impact of aircraft emissions on our climate is two or three times greater than if the same amount of CO2 was released by vehicles on the ground. For these reasons aviation fuel (kerosene, a fossil fuel) should be taxed, in order to make the polluter pay for the damage they are doing and to encourage a reduction in the amount of emissions. At present, aviation fuel is largely free from taxation - most countries do not tax it for internal journeys and international treaties prevent taxation of fuel used for international flights. This should be changed.
The aviation industry recognises the impact of aircraft emissions on the climate, although the extent of the damage compared to other uses of fossil fuels is still uncertain. However the industry, led by the International Civil Aviation Organisation is making considerable progress towards reducing emissions. Engines are becoming more efficient and so are flight procedures, allowing fuel to be used more efficiently. ICAO pollution standards have been progressively tightened for a range of different emissions. As a result, emissions per passenger kilometre have been reduced by 70% over the past forty years. Research suggests that CO2 production can be halved by 2020 as airlines update their fleets of aircraft and technology continues to improve. Given this voluntary progress and the continuing efforts of airlines and aerospace companies, taxation is unnecessary.
Taxing aviation fuel would encourage greater fuel economy by making kerosene more expensive. As the...
Taxing aviation fuel would encourage greater fuel economy by making kerosene more expensive. As the popularity of air travel continues to increase rapidly, it is important to put pressure on the aviation industry to use fuel as efficiently as possible so as to hold emissions down as much as possible. With fossil fuel reserves running out, fuel conservation is also a wise use of finite resources. More expensive fuel would give airlines an incentive to adopt the most modern technology and update their fleets. They could also adopt flying practices aimed at maximising fuel efficiency - e.g. flying at lower speeds even though journey times would be longer.
Airlines already have a price incentive to maximise fuel efficiency, so a tax on fuel is unnecessary. Fuel is a major cost item for all airlines and as prices of fossil fuels have soared over the past few years, so it has put pressure on airlines to change their practices and adopt new technology in order to survive. Both Boeing and Airbus have responded to this market demand by producing new aircraft with much lower emissions per passenger, and airlines are already ordering these in large numbers. Compared to the large market swings in price for aviation fuel, a tax would have little additional impact.
Air travel has other negative impacts on the environment, beyond its contribution to climate change....
Air travel has other negative impacts on the environment, beyond its contribution to climate change. The rapid increase in flights over the past two decades has led to increased local air pollution, noise pollution, traffic congestion (and vehicle emissions) around airports, and the loss of land to new runways and terminal buildings. The rise of budget airlines offering very cheap fares for short-haul trips is one of the main drivers for these problems. These budget airlines particularly contribute to greenhouse gas emissions as lots of short-haul flights are especially environmentally unfriendly (emissions are most heavily discharged on take-off and landing). A tax on aviation fuel would bring an end to ultra-cheap flights as increased costs were reflected in higher ticket prices, and so reduce the runaway growth in air travel, with all the problems associated with it.
Taxing aviation fuel would have a dangerous economic impact on airlines. Airline companies have very high fixed costs (hugely expensive fleets of aircraft, large and well-paid staff, landing fees, etc.) and so their finances are very precarious. Already the big airlines in America are struggling to survive and a number of European companies have also gone bust or been forced to merge in recent years. Even if the level of taxation was initially very low, a small impact on passenger numbers as some people are put off travelling by slightly higher prices could tip some airlines over the edge. When airlines go bankrupt thousands of people are put out of work and many more are greatly inconvenienced as their holiday or business plans have to be cancelled. The tourism industry, which employs millions more people, will also suffer if people cannot afford to travel.
A tax on aviation fuel would be progressive and fair, as the very poorest are already unable to affo...
A tax on aviation fuel would be progressive and fair, as the very poorest are already unable to afford air fares. Faced with higher costs, airlines will pass these on to their customers in the form of higher ticket prices. Even among those who can afford air travel, the rich consume many more flights than the less well off, so a rough equity would be achieved. In any case, the sums involved are unlikely to prevent anyone flying off on an annual holiday, as even a 10% rise in air fares would be less than 5% of the total cost (including hotels, meals, etc.) of the whole experience.
Cheaper air travel has been of great benefit to hundreds of millions of people. Huge numbers who had never been able to travel beyond their home country before are now able to explore the world and enjoy what used to be just a privilege of the wealthy. Those who wish to end budget air travel are partly motivated by snobbery, but cheap fares have a wider political and social benefit. By opening people’s minds to other cultures they create more understanding and tolerance in the world. They also aid development in previously remote areas as tourism creates new sources of income for the people there. At the same time ease of movement has freed up the global labour market and increased productivity in the developed world. We should do nothing to raise the cost of flying and check such a positive trend.
A tax on aviation would be international in scale and provides an excellent opportunity to raise mon...
A tax on aviation would be international in scale and provides an excellent opportunity to raise money for development aid. The EU is considering such a plan as a way of providing additional funding to make sure its Millennium Development Goals targets will be met. France, Germany, Brazil and Chile are already calling for such an initiative, and France is unilaterally introducing a levy on flights in 2006 to go to meeting the MDGs. In the long term a global tax on aviation could be administered by the United Nations, providing it with a regular, predictable income safe from political interference. Greater UN control over development aid will also overcome current problems of duplication, favouritism and waste in competing national programmes. Setting revenues from aviation aside to fund international aid will make a tax more acceptable to passengers, and will spread the burden of aid funding more fairly around the world.
Unless a tax on aviation was so high that it damaged the airline industry, it is unlikely to meet the need for development aid. Countries have already made commitments to fund the Millennium Development Goals (MDGs) and they should be prepared to meet their promises out of their domestic budgets, rather than experiment with a untested gimmick. There is a danger that if politicians and voters feel international aid has its own tax they will stop funding it from regular taxation. There are also serious questions about accountability and administration - national aid budgets are already much more likely to be well run than the programmes of undemocratic international institutions such as the UN and EU. \
Finally, hypothecation of revenues (meaning money raised by a particular tax has to be spent on only one thing) is in itself bad. There is no reason to think that the need for development aid will go up or down with the economic fortunes of the airline industry. If another terrorist attack like 9/11 took place (or there was an international disease outbreak such as SARS or Avian ‘flu), aviation could be badly hit again. With such a tax, fewer flights would mean less money for development aid - is that sensible?
A tax on aviation fuel could certainly be put into effect on an international basis. Climate change...
A tax on aviation fuel could certainly be put into effect on an international basis. Climate change is a global problem and the ICAO was tasked in the Kyoto Protocol to look at how the aviation industry worldwide could reduce emissions. As it is in the interests of all countries to tackle aircraft emissions, an international consensus could certainly be achieved given effort. Agreements on other difficult issues have been reached in the past (e.g. the Millennium Development Goals, anti-landmine treaties, the Montreal climate change conference in 2005).\
Even before international agreement is reached, groups of states could still adopt such a tax effectively. For example, EU states could apply a fuel tax to EU airlines on European flights, and extend it to non-EU airlines in Europe by renegotiating Air Service Agreements with other states. Levels of tax can be set low enough to avoid distorting travellers’ choices about where they fly.
A tax on aviation fuel would be impractical and impossible to put into action. Attempts to place a tax on fuel by individual states will fail, as airlines can easily obtain fuel more cheaply elsewhere. And if individual countries raise the cost of flying to and from their airports, they will lose income from tourists and business travellers to other states. Trying to put a global tax in place will also fail - international treaties actually make it illegal to tax aviation fuel (the 1944 Chicago Convention, reinforced by many bilateral Air Service Agreements) and there is no international consensus for change.
An alternative way of controlling aviation emissions would be to introduce a “cap and trade” system....
An alternative way of controlling aviation emissions would be to introduce a “cap and trade” system. This is the ICAO’s preferred option for addressing climate change and would involve airlines being issued with a “permit to pollute” set a certain level. If they wish to emit more greenhouse gases than the permit allows (e.g. because they wish to put on more flights), then they have to buy spare pollution credits on an open market. Sellers could include other airlines (e.g. if they reduce their number of flights, or invest in more environmentally-friendly aeroplanes), and also companies in other industries with spare capacity. Such a system is encouraged under international climate treaties and would fit in with existing EU initiatives for industry. Cap and trade is a market-based solution which captures the environmental costs (“externalities”) of flight and makes the airlines pay for them (“internalises the externalities”). Over time, reducing the overall amount of greenhouse gas emissions permitted under cap and trade could increase the incentives for aviation companies to invest in cleaner technology and change their business practices.
Emissions trading has many problems. Unlike other solutions it does not raise any revenue for development aid - one of the main advantages of a global aviation tax. Even on its own terms, emissions trading is flawed. For a start the fact that the aviation industry prefers it to a tax on fuel suggests it will have little impact. Cap and trade can sound good in principle but is very hard to make work correctly or fairly. For example, who decides what level the permits are set at? Too high and it makes no difference to emissions. Too low and the airline industry is bankrupted. The system also favours large existing airlines (often very inefficient) over new or growing ones. And how would the system be policed? The EU has been trying to put such a system in place but cannot secure the cooperation of other countries, especially the USA, to make it work.
An alternative way of taxing aviation would be to place a charge upon aeroplane tickets. An interna...
An alternative way of taxing aviation would be to place a charge upon aeroplane tickets. An international tax on ticket sales could raise a great deal of money for the developing world (see point 5 above) while still limiting the increase in flights. This has the advantage of being within international law (unlike taxing aviation fuel, which would require every country to agree to change the Chicago Convention). It could also easily be begun by a group of countries, e.g. the EU, and extended as other countries came to see the benefits of the idea. EU countries such as Britain and Sweden already have such a charge for take off and landing at their airports (although this is not applied to development aid funding), so there is evidence that it would not distort the aviation market. France will begin to impose a development-aid levy on flights using its airports from July 2006. The EU as a whole is considering the proposal and the UN General Assembly in September 2005 welcomed the idea.
Like all proposals to tax aviation, this would do economic harm to the industry and particularly affect poorer travellers. It also suffers from the problems of using aviation money to fund development aid outlined in point 5 above. A levy on tickets is actually worse for the poor and for tourism than some other solutions because it would particularly hit budget airlines where the levy would be a large proportion of the overall ticket price. It is also a poor solution to environmental problems as it doesn’t target emissions directly. Unlike a fuel tax or emissions trading there would be no incentive for airlines to invest in more environmentally-friendly engines, etc.
What do you think?