Why must the demand for aviation be restricted
Responding to the Paris climate agreement to limit warming to 1.5OhC. In 2019, the British government adopted a commitment to achieve net zero greenhouse gas (GHG) emissions by 2050. The Commission on Climate Change (CCC) provides the government with climate policy recommendations and calculated that in order to meet this deadline, aviation growth must slow down so that emissions do not exceed 25% of current levels. Aviation demand growth is expected to be much higher than this level. Although the international response to the Covid-19 pandemic has temporarily reduced departure levels, the experience of previous shocks to the industry shows that demand will rebound soon. In the UK, 15% of people take 70% of all flights, and nearly 50% of the population don’t fly at all in a given year. This is a hugely unequal distribution of the aviation carbon budget (and a large part of the UK’s total carbon budget). A just transition to net zero emissions must reduce aviation emissions in a way that addresses this inequality. Any aviation policy used to cap flights for the entire population will reflect judgments about how these flights should be allocated—whether explicit or implicit.
Any cap must address existing inequality
The total number of flights—the upper limit of 25%—is determined by the aviation carbon budget.in some meaning ‘The size of the pie (available for flights) is fixed, but the policy may affect who gets what slices and at what price. There are two broad ways to reduce the number of passengers: restricting air capacity—for example, through regulation and reducing airport expansion, and limiting the demand for flights—for example, through taxes. Both of these methods may directly lead to price increases, or price increases due to the price impact of demand exceeding capacity. But the distribution effect of different options is highly variable. Policies designed to help limit the growth of air passengers face daunting challenges in maintaining the industry’s carbon budget, while also considering how to allocate the carbon budget throughout society. Just as excessive air travel can undermine the carbon budget, so the choice of policy design also risks preventing many people from achieving air travel.
Frequent Flyer Levy is the fairest way
In 2015, a report by the New Economy Foundation ‘The “free rider” movement proposes to impose a frequent flyer tax (FFL) to achieve the comprehensive goal of limiting aviation emissions while ensuring more gradual flight allocation. FFL charges a fee, starting from zero for the first flight, but will increase after each flight within a year. It will replace the existing air passenger tax (APD) currently applicable to each ticket-£13 for short-haul flights and £78 for long-haul flights in economy class.
A survey in 2018 showed that among many proposals to reduce the number of passengers, FFL is the most popular choice. This report presents a new model that compares the distributional impact of illustrative FFL with the increase in APD and airport capacity constraints.
All three options are set at a level consistent with a 25% ceiling for aviation growth by 2050 and compared with a baseline scenario of unlimited growth. The analysis of the distribution of existing aviation policies on both supply and demand shows that FFL is not only the most popular among the existing policies, but also the most advanced.
The NEF model shows that in our FFL scenario, the 20% of the highest-income population in the UK has significantly reduced flights (about 30%) compared to an unrestricted growth world. At the same time, the lowest 20% of people currently fly five times more frequently than the richest 20%, and they will be able to take as many flights as the unrestricted growth. In the case of an increase in APD, the situation is just the opposite: as all airfare prices increase, the lowest-income quintile has the largest decrease (-19%), while the highest-income quintile has the least decrease (- 13%).
A similar pattern can be seen when examining the direct tax burden. On average, the bottom 20% of the population only pay an FFL payment of £7.75 per year. This is lower than the minimum tax paid under the APD, regardless of whether the current tax rate (£13 per year) is maintained or the APD is increased in accordance with the 25% ceiling (£41 per year). A higher percentage of the FFL tax burden falls on the wealthiest people, with the top 20% paying an average of £165.85 per year.
Due to the increase in average airfare prices, limiting airport capacity will also represent a retrogressive policy option, as low-income groups have fewer flights. The impact of capacity-constrained areas will be more complex, and the poorest groups will suffer the most in areas with the largest gap between demand and airport capacity. In contrast, FFL will produce greater reductions in London and the southeast, where the proportion of high-income earners and frequent flyers is higher.
Just transition
Any caps or restrictions imposed on aviation to achieve the UK’s international climate commitments could have a knock-on effect on employment in the industry. However, in the medium term, the main threat to employment remains automation and continued efficiency drivers, which have been accelerated by the Covid-19 pandemic. However, the selected emission reduction policy does have a relevant impact on the regional distribution of any resulting unemployment. In this regard, FFL is once again arguably the most progressive policy, because it has done the best in protecting employment in London and the UK outside the southeast, at least historically where unemployment rates have been high. Wherever possible, it is vital for the government to develop a broader policy package for aviation to ensure a fair transition for workers affected by climate policy. This includes protecting their long-term employment prospects by creating new job opportunities, and supporting workers’ skills upgrading and retraining when necessary to obtain future zero-carbon jobs. In realizing this agenda, it is essential that a just transition puts the voice of workers and their union representatives at the heart of the policy decision-making process.
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