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Will increasing passenger taxes really lower aviation’s carbon emissions?

Will increasing passenger taxes really lower aviation’s carbon emissions?
19 Dec
Across the EU, emissions from aviation are increasing and passenger numbers are on the up. As Germany raises the taxes it imposes on passengers, Geographical asks whether these sums can really make a difference

For all the talk of flygskam – a Swedish word meaning ‘flight shame’ – which news reports would have us believe is ‘sweeping’ across Europe, preventing people from taking to the skies, the actual number of people flying in Europe is still increasing.

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Aviation emissions grew by eight per cent in the EU in 2016, while passenger kilometres flown have increased by 60 per cent since 2005. And, though it’s not all bad news – average fuel consumption of commercial flights has decreased by 24 percentage points since 2005 – the efficiency gains are not enough to undermine rising emissions.

If unmitigated, aviation emissions are expected to double or triple by 2050 and, in doing so, consume up to one-quarter of the global carbon budget under a 1.5ºC scenario. What’s more, the IPCC Fourth Assessment estimated that aviation’s total climate impact is actually around two to four times higher than its CO2 emissions alone, because flying at altitude generates additional climate warming.

Many countries are now implementing measures to tackle this footprint, primarily in the form of taxes paid by the passenger. The German government recently announced plans to increase the taxes it places on flights. The regulations will roll out in April of next year, with the tax on short-haul flights increasing to €13.03, an increase of 75 per cent on the previous level of €7.50. There will be taxes on longer flights too, with a 40 per cent increase on mid-haul and long-haul flights, leading to taxes of €33.01 (up from €23.43) and €59.43 (up from €42.18) respectively.

shutterstock 1449367280The German government recently announced plans to increase the taxes it places on flights

This puts Germany near the top of the passenger tax leaderboard, though it still lags behind the UK which implements the highest taxes in Europe. The UK air passenger duty (APD), paid by all air passengers leaving the UK, amounts to £13 (€15.24), per ticket for flights up to 2,000 miles in standard economy class flights and £78 (€91.49) for longer flights in economy. (This increases to £26 and £172 for premium class tickets.)

But whatever the exact level, the question remains – do these taxes make any difference when it comes to carbon emissions?

Stefan Gossling is a Swedish academic specialising in tourism, transport and sustainability and is the editor of Climate Change and Aviation. Issues, Challenges and Solutions. He views increased passenger taxes as a positive step, but only a small part of the solution, referring to the EU’s current policies as ‘a million different tiny measures’. On the one hand, Gossling points to artificially low fares as one of the key drivers for increasing air travel. ‘The price has declined massively for flying over the last 20 years,’ he says. ‘You have a lot of travellers who are induced to fly and who fly for purposes that might not really represent a deeper need of getting to another place.’

But on the other hand he isn’t convinced that the fairly modest increases imposed by the various European taxes make much difference. ‘The additional taxes are always in relation to what the overall ticket price is,’ he says. ‘Even if you put on something like €60, it probably doesn’t matter much to people. If you pay €1,000 for the flight, then that is still a small amount of money. It’s still very cheap in comparison to other transport modes that have to pay the full tax on fuel.’

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A European Commission Report released in June 2019 also sought to model the impact of an increase in ticket prices. The report concluded that on average, a ten per cent increase in ticket prices would result in a nine to eleven per cent reduction in demand across the 27 member states included in the analysis. It concluded that lower demand would reduce the number of flights, with emissions and noise also reduced by nine to eleven per cent in most member states.

Unsurprisingly, players in the aviation industry aren’t keen on this approach. Many airlines argue that air taxes make no difference to carbon emissions and that anything which reduces an airline’s ability to make a profit simply takes away from its ability to improve efficiency. As regards the tax increase in Germany, a spokesperson for the German aviation association, the BDL, said in a statement: ‘We oppose the tax increase. We do not believe this additional tax revenue will contribute to the nation’s or the industry’s climate goals. It will reduce German airlines’ financial resources to invest in new technologies and fleet.’

A report by the International Air Transport Association, the trade association for the world’s airlines, contained a similar message, claiming that: ‘Experience shows that the effectiveness of levies as incentives for cleaner/quieter aircraft is doubtful. No government that introduced a ticket tax has been able to demonstrate that such tax reduced CO2 emissions.’

shutterstock 1489269719Despite the popularity of the term ‘Flygskam’ and the concept of flight shame, the number of kilometres flown in the EU has increased

The report adds that taxes limit an airline’s ability to invest in cleaner aircraft; that passengers facing high taxes are more likely to opt for longer journeys through airports without taxes; and that the local economy is negatively affected because a decline in air passenger volumes leads to decreased tourism and a drop in GDP.

This is an argument largely rejected by climate scientists and campaigners. Andrew Murphy, an aviation manager at research and campaign group Transport and Environment says that airlines’ claims as regards low taxes leading to cleaner fuels are flawed.

‘If you look even at the most profitable airlines they only put a small amount into investing in new fuels. What they really talk about is buying new aircraft, which is fleet expansion. And that’s something that they intend to do anyway,’ he says. ‘The aviation industry has this idea that it can solve this problem by itself and that if we just leave it unregulated it’ll solve it. But we've been trying this now for decades. Every year aircraft efficiency improves around one or two per cent, passenger numbers grow around four to five per cent and so aviation emissions increase by two to three per cent. We've left businesses for decades to regulate their own climate problem – they haven’t solved it.’

Gossling also sees continued fleet expansion as a problem for the industry, and the wrong solution to the climate crisis. ‘Airlines have tiny profits and if you add a CO2 tax to that, they really will have their backs to the wall,’ he acknowledges. ‘But the problem is not tax. The problem is that there’s so much overcapacity in the market so that they never can get a decent profitability. Every fifth seat is still flown empty in the global system. So there’s too much capacity in the market and that makes it impossible to ever earn a decent profit margin.’

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As for the wider argument that airline taxes negatively impact a country’s GDP, the European Commission’s 2019 report casts doubt on this. While it accepts that increasing taxes would have a negative effect on the aviation industry as a whole, it rejects arguments that such taxes would be detrimental for European countries’ employment levels and wider economies. ‘In general, introduction of a tax that increases the ticket prices by ten per cent has no net impacts on jobs,’ the report states. ‘The negative impacts on employment in the aviation sector and suppliers are offset by positive impacts in other sectors caused by increased fiscal revenue, which either results in higher government spending, or results in lower taxes and increases demand of households or businesses.’

The general conclusion therefore appears to be that passenger taxes will reduce demand to a certain extent, but that alone, they will not see aircraft emissions impacted by a significant degree. In light of this, another key issue for many commentators is the need to also remove the aviation industry’s ‘tax holiday’ when it comes to fuel.

In the EU, airlines currently enjoy an EU-wide fuel tax exemption which puts their tax burden at a rate much lower than other industries, even with passenger taxes in place. Before the recent increase, Germany’s passenger tax on airline tickets generated one billion euros every year. Though it sounds a lot, it’s only a quarter of what trucks in the country pay in toll payments every year, or about 35 times less than the motor fuel tax.

shutterstock 573530380Passenger kilometres flown in the EU have increased by 60 per cent since 2005

Talks have been taking place in Brussels this December regarding removing the fuel-tax exemption as part of the new European Commission’s ‘European Green Deal’. However, while several countries have expressed support, Greece, Cyprus and Malta remain unwilling to agree, preventing the move from going ahead. The next step might be a series of bilateral agreements among member states to tax kerosene but nothing has yet been agreed.

For Murphy, this is a significant problem. ‘We’re essentially subsiding flying by keeping it fuel-tax free,’ he says. ‘As we keep subsiding people to fly and take multiple holidays, it’s no surprise that the emissions from the sector have continued to grow. We don’t think that taxation will solve all the problems and we don’t think we can tax our way to zero emissions. But nevertheless, it’s difficult to see a credible aviation climate policy which doesn’t start with pricing aviation’s climate impact, and that begins with taxing fuel.’

It remains to be seen whether campaigners get their way and see a fuel tax imposed in the EU. Equally, while we can expect passenger taxes to increase, whether they ever reach a level that actually puts people off flying isn’t clear. What is apparent is that with emissions from aviation continually increasing, and with most airlines running very small profits, taxation is likely to remain a battleground.

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