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An Equitable Alternative to APD

October 12, 2009
Harold Goodwin
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The Global Humanitarian Forum estimates that climate change accounts for over 300,000 deaths each year, the equivalent of the 2004 Indian Ocean tsunami every year. A report commissioned by University College London and the Lancet has concluded that climate change is the biggest global health threat of the 21st century and that the poor will be the worst affected. Climate change impacts mainly on the world’s poor in the developed and the developing world.

Tourism offers opportunities for the economically poor to engage in a global industry and to secure livelihoods from it. The tourism industry is taking responsibility and making real efforts to improve its sustainability. The airline industry is still in denial. The UK government has seen an opportunity to raise tax and taken it.

Tourism came to predominate in the Caribbean for the want of other industries which could find a market. Tobacco and sugar were industries undermined by taxation and health campaigns in the developed countries of Europe and Noth America. Tourism is the Caribbean’s comparative advantage.

Air Passenger Duty (APD) raises revenue for the UK Treasury but it is NOT a green tax. It does not ensure that the polluter pays and the revenues are not hypothecated to assist those who are affected with adaptation. So APD fails to penalise those airlines which pollute the most, the passenger pays the same regardless of how much pollution they cause and there is no incentive for the industry to clean up its act and to be more carbon efficient reducing pollution.

And APD is inequitable – the tariff being dependent on the air miles to the capital city rather than the actual fuel burned and the pollution caused. APD does nothing to help the economically poor cope with climate change.

The challenge is to find and deploy a mechanism which can be introduced globally, which provides a level playing field and which is cheap and efficient to operate, which places effective pressure on the airlines to reduce their carbon emissions by flying more fuel efficient planes, improving their operating procedures and load factors; and which meets the full costs of the floods, famine and disease caused by their carbon pollution and ensures, through hypothecation, that those affected are helped to adapt.

This proposal would hypothecate tax raised from those able to afford to fly, whether in the developed or developing world, for business or for leisure, to assist those bearing the brunt of climate change. The polluter, the airline, pays. Those who take responsibility and achieve greater efficiencies, reducing their carbon pollution, would pay less; such a tax would push the airlines to move out of denial, and to reduce their emissions. No passenger tax can achieve that.

It is the relatively wealthy in the developed and developing worlds that fly; their flying imposes costs on others. Those costs should be met in full by those who fly and the proceeds should be hypothecated to establish a Global Adaptation Fund to benefit those areas of the world most seriously impacted by climate change.

A global tax on aviation based on fuel purchases and the DEFRA shadow price of carbon at £27 per ton could raise £16bn for adaptation and this would transfer wealth from the relative wealthy to the economically poor affected by climate change. This would cost an average of between £7 and £8 extra per passenger per flight and if airlines were taxed on the basis of fuel consumed at the end of a quarterly accounting period they would be incentivised to increase their fuel efficiency per revenue passenger mile.

Consumers have rightly been wary of carbon offsetting. However, when offered the opportunity to choose a carbon efficient airline through a commercial carbon friendly flight calculator which enables them to identify the greenest and cheapest 57% of them chose that option, paying an average premium of 19% over the cheapest flights.

This is an equitable approach – those who fly pay a tax based on how much carbon they cause to pollute the earth’s atmospheres and the amount they pay is determined by how much pollution they cause at the full price of carbon.

Consumers have demonstrated that they are willing to take responsibility. The British Government could provide international leadership, announce a new strategy to raise significant funds for adaptation and work through the International Civil Aviation Organisation (ICAO) to have a proposal on the table for Copenhagen.

APD should be abandoned in favour of air fuel taxation – the British Prime Minister could pay for UK air passenger pollution with a cheque backed by APD earnings and lead the campaign to introduce a more equitable airline fuel tax through ICAO. Now that would be enlightened leadership

Professor Harold Goodwin
International Centre for Responsible Tourism
Leeds Metropolitan University

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