Proposal for a frequent flyer levy
According to the UK’s Committee on Climate Change (CCC), growth in demand for aviation must be limited to 60% more than 2005 levels in 2050 to meet the UK’s overall emissions reduction target. The CCC says this means aviation emissions will remain at 2005 levels, while other sectors of the economy will have to cut emissions by 85%. If demand growth is not limited, targets for other sectors will need to be even more ambitious, which the CCC concludes there is limited scope for.
Increasing passenger demand is a major driver of the global warming impacts of aviation, but has been largely ignored in discussions around how to limit aviation emissions. Efforts have focused instead on improving fuel efficiency, exploring lower-carbon biofuels, and other marginal technological substitutes. There has been no assessment of the possibilities for using fiscal instruments to actively constrain the number of flights taken by the frequent flyers who are most responsible for the environmental impacts of aviation.
The current structure of Air Passenger Duty (APD) can be rationalized on environmental and social grounds. Longer journeys are charged more heavily, as are first and business class tickets that require more physical space. However, APD does not provide an escalating incentive to reduce demand amongst frequent flyers. The current tax regime will see an increase in passenger demand of 127%, rather than the 60% the CCC recommends (DFT, 2013).
This paper considers the potential for a fiscal reform that can:
Limit passenger demand to no more than 60% by 2050 in line with CCC’s recommendations, and remove the need for a new runway in south-east England;
Incentivise a more equitable distribution of flights across the income spectrum.
In Chapter 2 we discuss the features of a Frequent Flyer Levy (FFL), a fiscal reform designed to achieve these goals.
In Chapter 3 we describe how a FFL could be implemented, considering practical implementation including the method of collecting tax revenues and data collection requirements. We also assess the impact on passenger demand, runway capacity requirements and socio-economic distribution of demand for air travel.