Frequent flyer levy could provide a fair and substantial source of finance for aviation decarbonisation

A global levy on frequent flyers could generate significant revenues towards the annual investment of $121 billion that ICAO estimates is required for the aviation sector to reach its 2050 net zero climate target, finds a study by the non-profit research group International Council on Clean Transportation (ICCT). It argues a variable levy based on flying frequency would focus the tax burden on wealthier frequent flyers – those defined in the study as taking more than six flights a year – and help ensure that people with lower incomes are not priced out of air travel because of climate policy. The study looked at two potential models: a flat per-flight tax or a frequent flying levy (FFL). Raising $121 billion in 2019 would have required a flat $25 tax on each one-way flight or a progressive FFL starting at $9 for a person’s second flight to $177 for their twentieth flight within the same year. At the recent COP27 climate conference, the EU’s chief representative suggested a levy on aviation could be a source of finance for the Loss and Damage fund agreed at the talks.

The authors of the study emphasise the inequality of income and uneven participation of those travelling by air is extreme, with the richest 20% worldwide taking 80% of the flights and the top 2% most frequent flyers responsible for around 40% of all flights. They estimate a global FFL would generate 81% of the revenue needed for aviation decarbonisation and 67% from high-income countries, versus 41% and 51% respectively from a flat tax, such as air passenger duty (APD). An FFL would therefore shift the tax burden from occasional flyers to frequent flyers, and from lower-income countries to high-income countries, relative to an APD.

Under an FFL, some high-income countries, such as Norway and Iceland, would almost double the amount of levy revenue collected compared to an APD, while residents in low-income countries would pay a fraction of the APD charges. An FFL could also alleviate the burden on global middle-income country residents compared to a flat levy.

High-income countries generated about 70% of aviation CO2 emissions between 1980 and 2019. “The shift of burden to high-income countries, in particular, is key to ensuring that aviation decarbonisation does not unfairly burden countries with low historical emissions,” says the ICCT report on the study.

Regardless of tax design, the impact of increased cost on travel demand would be moderate, reducing travel by around 7% globally, estimate the researchers, although this would be an extreme case where all decarbonisation costs are passed on to consumers, based on 2019 figures, and the actual impact would likely be even smaller. Demand impact is fairer under an FFL than under an APD as it would be concentrated in the top income brackets and the frequent flyers, they argue.

“Frequent flyers should cover more of the costs associated with clean technologies,” said the study’s lead author, Sola Zheng. “Otherwise, some people could be priced out of flying – those who barely contributed to the climate crisis in the first place.”

Added co-author Dan Rutherford: “Taxing frequent flyers regardless of their passport would align the costs of decarbonisation with historical responsibility for emissions, and it could be done without distorting competition across countries or carriers.”

The concept of an FFL has already been mooted in the UK, which applies one of the highest air passenger duties in the world, and in 2019 the government’s advisory Climate Change Committee identified the potential of an FFL as a fiscal and demand management tool to address the country’s aviation emissions. This was backed by the Parliament’s citizens’ Climate Assembly UK, which came down in favour of the levy. UK polls on the subject have also demonstrated strong public support for an FFL, ranging from 60% to 89% in favour. Following a study conducted on behalf of UK climate charity, Possible, a campaign advocated that everyone should get one tax-free return flight a year each year and that FFL revenues be invested into greener alternatives to flying.

Another study has put forward the concept of an ‘air miles levy’ as a variation of an FFL and based on the distance or carbon emissions of the flight, and factoring in the larger per-person emissions generated by flying business or first class. Since frequent flyers are more likely to purchase premium tickets, a frequency-based levy could reduce emissions by lowering demand specifically for the most carbon-intensive tickets.

The ICCT researchers acknowledge that implementing a global FLL has major challenges, such as establishing an accurate and privacy-protected flying frequency database, distinguishing business trips from personal trips and ensuring effective use of the revenue collected. A real-time, accurate database of the number of flights taken by travellers would need to be set up and maintained by national governments or an international body. This would likely require airlines to collect travel document details at the point of ticket sales, who would then have to charge the appropriate levy retrieved from the database. Travellers may also use different documents for different flights, which would complicate the accounting. Importantly, with the large amounts of data being collected and stored, the database would need to adhere to high privacy protection standards.

Ensuring all governance bodies reinvest the collected revenues into low-carbon aviation technologies would be fundamental to such a plan. The revenues could be managed by individual countries or, better still, pooled internationally so that funds can be prioritised for countries that make the least contribution to climate change but bear the greatest impacts, such as small island developing states.

In a paper released by the Tourism Panel on Climate Change at COP27, Chris Lyle of Air Transport Economics and a former senior official at ICAO, said as well as ‘leakage’ difficulties and data and privacy concerns, achieving a multinational agreement on such a levy and on a common level is “unrealistic given the sovereignty of national taxation jurisdictions.”

ICCT said it plans future workstreams to investigate the implementation logistics and also quantify the emissions impacts of an FFL after further segmenting the flying activities by distance and seating class.

During the negotiations at COP27 on a ‘loss and damage’ fund to help protect vulnerable developing countries against the worst impacts of climate change, the EU’s climate policy chief, Frans Timmermans, said the fund would need to look at innovative sources of finance such as levies on aviation, shipping and fossil fuels, reported Climate Home.

Photo: London Gatwick Airport