The impact of the UK aviation tax on carbon dioxide emissions and visitor numbers

We find that the recent doubling of the Air Passenger Duty has the perverse effect of increasing carbon dioxide emissions, albeit only slightly, because it reduces the relative price difference between near and far holidays

Karen Mayor; Richard S.J. Tol

2007

Scholarcy highlights

  • The contribution of aviation to global greenhouse gas emissions is small but fastgrowing
  • We investigate the tax proposed by the Conservative Party which would involve the introduction of a “Green Air Miles Allowance” whereby people would get an allowance of one short-haul trip a year and would pay a higher rate of tax on the rest of their flights
  • According to the Department for Transport 50% of the UK population does not use air travel and as the Hamburg Tourism Model uses a representative tourist, this is the equivalent of a tax rate reduction of 50% on short-haul flights out of the UK if flown by a UK resident
  • Because tourist destination choice is driven by relative prices, a boarding tax makes far-flung destinations more appealing, not less, and UK aviation emissions increase as a result, albeit by only a fraction
  • The green miles proposal of the Conservative Party is almost equivalent to revoking the boarding tax paid by UK residents, while keeping the tax for other travellers
  • The sensitivity analysis does reveal a crucial assumption; if we assume that domestic holidays and foreign holidays are not substitutes for one another, a boarding tax would have a perverse effect on emissions
  • Not unexpectedly, that an emissions tax would have the desired result of reducing emissions, even if domestic and foreign holidays are not substitutes

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