Near-term demand reduction policies could preserve an outside chance of remaining within carbon budgets and minimize the impacts of climate change.
4.1 Demand management in the near term can buy time for supply-side solutions in the long term
Stepwise through Chapter 3 this paper investigated the supply-side options for decarbonizing the UK aviation sector, with the aim of reducing the risks of overly relying on yet unscaled supply-side solutions, and simultaneously keeping within the UK aviation sector’s fair share of carbon budgets. The net result of reducing these risks is that aviation demand in 2050 would need to be 24.5 per cent lower than in 2019.
Given the severe risks of climate change, the continuing inflationary period that is impacting the global economy, and the dampened demand for aviation particularly due to the COVID-19 pandemic, there is an opportunity to consider a greater near-term reduction in the number of flights and the average journey distance. This approach could add significant value to net zero strategies as many of the supply-side decarbonization solutions available to the aviation sector are still in their infancy, and hence need time to develop. Furthermore, given how tight carbon budgets are to avoid catastrophic climate change, a precautionary approach is not just prudent, but necessary. As such, the analysis in this paper includes one last scenario that puts the emphasis of demand reduction on the near-term, rather than relying on incremental demand reduction each year out to 2050. To model the demand reduction required in the near term, demand follows a Wald or inverse gaussian distribution, which can also be thought of as an inverse bell curve. As with all other scenarios, the model is constrained to ensure that the level of demand balances against the defined carbon budget with all the supply-side decarbonization options applied.
Given how tight carbon budgets are to avoid catastrophic climate change, a precautionary approach is not just prudent, but necessary.
The net result of this final scenario is that demand (PAX-km) in 2030 would need to be 36.1 per cent lower than in 2019, with demand returning to 2019 levels by 2050 (scenario G, Figure 6G). For context, demand in 2022 is modelled as being 34.7 per cent lower than 2019, due to the COVID-19 pandemic. It should be noted that the future deployment of supply-side decarbonization options results in the emission intensity of flights in the near-term being greater than that in the future. As such, for an equivalent carbon budget, demand management in the near term would need to be greater than future demand management. Hence, in this final scenario (scenario G, Figure 6G), the necessary demand reduction of 36.1 per cent in 2030 is 11.6 percentage points greater than the 24.5 per cent reduction in 2050 of scenario F. This approach of near-term demand management to enable supply-side decarbonization is aligned with the CCC progress update of October 2022, which states, ‘The Government’s plans for aviation focus on sustainable aviation fuel and zero/low-emission aircrafts. These technologies have potential, but there are significant risks in their delivery. In the near term, managing demand would have a much greater benefit for the climate.’
Within all scenarios, inclusive of near-term demand management scenario G, it is assumed that demand (PAX-km) continues to rebound from the impact of COVID-19 lockdowns in 2020 and 2021, recovering to pre-pandemic levels by the end of 2024. And that any UK government policy to enact near-term demand management will take time to implement, be that by means of a frequent flyer levy or equivalent policy that encourages passengers to fly less frequently and shorter distances. The net result of this can be seen in Figure 6G, where demand initially recovers from a low of 34.7 per cent below 2019 levels in 2022, back to 2019 levels at the end of 2024, and then starts to decline again in 2026 as a frequent flyer levy or equivalent policy mechanism begins to reduce the number and distances of flights taken, towards the 2030 low of 36.1 per cent below 2019 levels. Through the 2030s demand then starts to return and by 2040 is almost 99 per cent that of 2019 levels as supply-side decarbonization measures ramp up.
Clearly a demand suppression policy mechanism, such as the frequent flyer levy, could be pursued before 2026. However, it is unlikely that the UK government will act before that time. This is particularly true given the prime minister’s recent net zero announcements that included a pledge not to introduce ‘new taxes to discourage flying’. This is based on two main factors. Firstly, that the political motivation to limit flying immediately post the pandemic, just as the public is enjoying a return to ‘normality’, is low. Secondly, accelerating climate impacts will likely result in additional public pressure on the government to act swiftly to reduce additional future impacts, and that this dynamic will take a few years to fully manifest. That said, the faster the UK government acts, the lower the risk of severe climate impacts and the smaller the UK contribution will be to both exceeding carbon budgets and runaway climate change.
As previously highlighted, many of the supply-side solutions to decarbonizing the aviation sector are yet to be commercially scaled, and significant uncertainty and risk surrounds many of the technologies, particularly regarding engineered negative emissions. Near-term demand management offers policymakers a risk minimization scenario that enables supply-side solutions time to develop and catch up, commensurate with the risks embodied by dwindling carbon budgets.
This final scenario also has the opportunity of stimulating greater investment in sustainable supply-side solutions. Clearly lower demand will result in lower profits, which could undermine investment from the aviation sector itself. However, given that this scenario forecasts demand to return to 2019 levels, following the near-term demand management measures, this scenario actually represents a greater long-term growth outlook than the supply-led decarbonization pathways modelled here that factor in under delivery. Furthermore, if demand management is prioritized out to 2030, the aviation sector and wider investment community is likely to increase funding for supply-side decarbonization solutions in order to unleash future demand.
It should be noted that, the CCC progress report of June 2023 recommended the development of an aviation demand-management policy framework, to be deployed in the late-2020s in the event of underperformance of decarbonization measures against the JZS projections (recommendation 116). In addition, the CCC also explicitly recommended fiscal policies should be used to raise the price of flying to act as ‘an effective signal to consumers that aviation has high emissions costs’, and suggested the use of either taxation, quotas or a frequent flyer levy (recommendation 58).
4.2 Inclusion of non-CO2 warming would increase the need for demand reduction
Google has recently been at the centre of controversy around the non-CO₂ effects of flying. Having previously reported emissions in kilogrammes of carbon dioxide equivalent (CO₂e), inclusive of water vapour emitted at high altitudes as part of an aircraft’s contrails, Google has now halved the emission figures it reports to users, stating that ‘we strongly believe that non-CO₂ effects should be included in the model, but not at the expense of accuracy for individual flight estimates’.
Within the JZS, the UK government omits non-CO₂ effects from its decarbonization pathways for the aviation sector, citing scientific uncertainties in the global warming effect. However, while there is a wide range of associated uncertainty, there is still a high probability that non-CO₂ aviation emissions (particularly cirrus contrails) cause significant additional global warming.
The inclusion of non-CO2 effects in the model used in this paper results in a significant contraction of carbon budgets, and an increase in the need for demand management measures.
A recent scientific study found that non-CO₂ impacts comprise about two-thirds of the net radiative forcing from aviation. The minimum likely effective radiative forcing (ERF) value is 55 mWm-2 (milliwatts per square meter), which is 60 per cent higher than the warming from CO₂ alone (34.3 mWm-2). The maximum likely ERF value is 420 per cent higher than the warming from CO₂ alone. The most probable ERF value of 100.9 mWm-2 is 294 per cent higher than the warming from CO₂ alone.
There are mitigations, besides flying less, that could reduce non-CO₂ effects. Contrail cirrus contributes the bulk of non-CO₂ aviation warming and can be reduced through alternative flightpaths to avoid areas susceptible to contrail formation, and alternative ‘low aromatic’ fuels to reduce combustion soot, which in turn reduces contrail formation. Both solutions could be deployed rapidly, within a few years, to eliminate a significant portion of non-CO₂ warming.
A recent study, looking at aviation contrail climate effects in the North Atlantic from 2016 to 2021 showed that, ‘around 12% of all flights in this region cause 80% of the annual contrail energy forcing’. Furthermore, Teoh et al. (2020) state that, ‘a small-scale strategy of selectively diverting 1.7% of the fleet could reduce the contrail energy forcing by up to 59.3%’. And that this would only increase both total fuel consumption and CO₂ emissions by 0.014 per cent each. Alternative flightpaths could therefore be implemented on a relatively small proportion of flights to achieve significant reductions in contrails. For journeys where altering a flightpath may result in an unacceptable increase in fuel consumption, alternative ‘low aromatic’ fuels could be deployed.
NGOs have raised concerns about the exclusion of non-CO₂ effects within the DfT modelling:
The inclusion of non-CO₂ effects in the model used in this paper results in a significant contraction of carbon budgets, and an increase in the need for demand management measures. Assuming that non-CO₂ effects result in a CO₂e value that is 2.94 times greater (see above) than CO₂ emissions for the years 2022 to the end of 2024, it is estimated that demand reduction in 2030 would change from 36.1 per cent to more than 60 per cent in scenario G. It is also assumed that by 2025 non-CO₂ warming has been eliminated based on the mitigation measures mentioned earlier. However, in the author’s view, this assumption is highly optimistic. Furthermore, it should be noted that for every year that passes where non-CO₂ effects continue to go unaccounted for, and unaddressed through policy, the non-CO₂ warming effect is eating into the remaining effective carbon budget.
4.3 The economic benefits of flying, and the social cost of carbon emissions
If the UK government were to pursue policy mechanisms to manage flight demand, it would be crucial to consider the benefits accrued from avoiding the worst impacts of climate change, relative to the reduction in gross domestic product (GDP) that demand management may bring about. It is out of the scope of this research paper to determine what the economic impact may be for a given level of demand reduction. However, in designing demand-management policies it is vital to consider the indirect contributions towards GDP as well as the counterfactual benefits.
Calculating the economic benefits of aviation in terms of the sector’s contribution towards GDP and gross value added (GVA) is complex, with different reports and studies providing varying estimates. As a 2021 study states, ‘no theoretical framework has yet been presented that comprehensively captures the full set of mechanisms by which aviation can contribute to economic development. Such a framework would cover both positive and negative regional impacts, as well as the mechanisms and spatial distribution behind them’. An Oxford Economics (2014) report breaks down the positive economic contributions into four categories:
- Direct: the output and employment of the firms in the aviation sector.
- Indirect: the output and employment supported through the aviation sector’s purchases of input goods and services from its UK supply chain.
- Induced: employment and output supported by the aviation sector and the firms in its supply chain paying wages to their staff, who spend part of their income in the UK.
- Catalytic: the economic activity enabled by the aviation sector. Some of these include the activity supported by the spending of foreign visitors travelling to the UK via air, and the level of trade directly enabled by the transportation of merchandise.
Based on the first three of these categories, Oxford Economics’ headline estimate of the aviation sector contribution towards GVA in 2014 was £52 billion per annum. Adding in the catalytic benefits, this total increases to around £71.5 billion.
More recently, the Aerospace Growth Partnership in 2022 estimated the ‘UK aerospace industry had an annual turnover of £22.4 billion in 2021’ and reported the sector’s GVA contribution as £8 billion in 2021. Cumulatively out to 2035, the Aerospace Growth Partnership anticipates the sector will contribute £191 billion towards GVA, or an average of £14 billion per annum over the next decade. The UK government’s JZS and the Sustainable Aviation industry report both estimate that the aviation sector directly contributed at least £22 billion per year to the UK economy prior to the COVID-19 pandemic. However, the House of Commons Transport Committee suggests the ‘entire aviation industry’ contributed almost £22 billion in 2019.
Not only are indirect, induced and catalytic economic benefits of the aviation sector complex to calculate, but the official UK authority on GDP statistics, the Office for National Statistics (ONS), does not calculate or record GDP values specifically for the aviation sector. When turning to GVA values, the ONS lists ‘Air transport’ (sector code KK7P) as contributing around £5.5 billion in 2019. To derive the value of almost £22 billion, the House of Commons Transport Committee report draws on this ONS data series, and includes the additional sector of ‘Air and spacecraft and related machinery’ (sector code KK65), as well as the results of the ONS Annual Business Survey on the non-financial business economy.
Not only do GDP and GVA estimations vary significantly for the aviation sector, so, too, do the number of jobs that the industry supports. The Aerospace Growth Partnership estimates 111,000 direct jobs, the House of Commons Transport Committee suggests 500,000 jobs of an unspecified type, and Oxford Economics produced a figure of up to 1.4 million (across all the categories listed above).
Taking the average yearly GVA projection of the Aerospace Growth Partnership (£14 billion/yr) as a lower bound, and the 2014 estimate by Oxford Economics (£71.5 billion) as an upper bound, this translates to a range of £354–£1,805 per tCO₂ emitted, based on 2019 emissions from the sector. However, if non-CO₂ warming is factored in (see section 4.2) this economic benefit falls to around £120–£614 per tCO₂ emitted. For the more commonly quoted value of around £22 billion, the economic benefit would be around £189 per tCO₂ emitted (inclusive of non-CO₂ warming).
It is instructive to compare the economic benefit of the aviation sector to the social cost of carbon (SCC), which measures the marginal cost (commonly in dollars or pounds per tCO₂) of climate impacts brought about by each extra tonne of carbon emissions. A recent Nature paper – which uses ‘improved probabilistic socioeconomic projections, climate models, damage functions, and discounting methods’ – estimates the mean SCC at $185 per tCO₂ ($44–$413 per tCO₂: 2020 US dollars), or £144 per tCO₂ (£34–£322 per tCO₂, based on the average 2020 exchange rate).
As with most calculations of the SCC, this mean value of £144 per tCO₂ is calculated within an IAM. It is important to note that the damage functions – which define the damage to society due to climate change – within IAMs regularly fail to fully capture the potential impacts of climate change, especially in the context of the tipping points highlighted in section 1.1. This was highlighted in a 2021 paper by the world-renowned economists Nicholas Stern and Joseph Stiglitz, who stated, ‘the estimates of damages from climate change in these IAMs is much smaller than is likely to occur. Not surprisingly, results on optimal policy change dramatically if the assumed damages from climate change are much larger’. Stern and Stiglitz go further, stating that there is ‘a systematic bias towards reducing the strength of action on climate change, that results from underestimating the benefits and overestimating the costs of such action’, and that the ‘intuitions of the scientific community may well be right: the simplistic models of the economists have simply not captured essential aspects of the societal
decision problem’.
According to world-renowned economists Nicholas Stern and Joseph Stiglitz, ‘the estimates of damages from climate change in these IAMs is much smaller than is likely to occur. Not surprisingly, results on optimal policy change dramatically if the assumed damages from climate change are much larger’.
To avoid distortions in the economic costs and benefits of demand management within the aviation sector, assessments should consider the positive economic impacts of demand management alongside the resulting lowered emissions and the reduced likelihood of climate change impacts. Positive economic impacts include, but are not limited to, a shift to other modes of transportation that may increase investment and job opportunities in these alternative forms of transport, as well as the potential for the expansion of domestic tourism. Furthermore, another benefit of flying that is difficult to quantify is the increased likelihood of securing foreign investment in UK businesses and improved trade. The counterfactual to this is how online meetings have expanded since the pandemic, meaning senior executives potentially have more time for multiple online investment meetings in the time of the average business flight. It should be noted that since 2002 business travel has fallen as a proportion of all flights, from 24 per cent in 2002, to 17 per cent in 2019. At the same time, the proportion of homeworking has grown, with one recent report indicating that flexible working could contribute £37 billion to the UK economy.
In July 2023, the New Economics Foundation found that increased air capacity can result in improved economic growth in less developed and less connected nations, as well as nations with a ‘strong inbound tourism bias’. But in nations such as the UK, with a ‘strong outbound tourism bias’, economic growth from the aviation sector ‘appears to rely almost entirely on the presence of business air passengers’. Furthermore, the report highlights that with net business travel growth having ‘effectively ceased, the macroeconomic benefits of British air capacity growth appear to have diminished’.
As previously mentioned, it is out of the scope of this research to quantify the economic costs and benefits of flight demand management. However, it is clear that a 36 per cent reduction in demand by 2030, as determined within the modelling here, would not necessarily result in a proportional reduction in the aviation sector’s contribution towards GDP.
While the post-pandemic financial recovery of the aviation industry is a crucial issue for the UK government and other policymakers, there are clear signs that this recovery is well underway. A 2023 KPMG report highlighted that, while global airline losses in 2020 amounted to around $140 billion, net profitability is expected to return in 2023. Pre-pandemic profit across the sector was around $35.5 billion in 2019.
Throughout the pandemic, the aviation sector (airports, airlines and related services) benefited from around £8 billion of government support. Given the climate benefits of near-term demand management indicated by the analysis here, with demand returning to pre-pandemic levels by 2050, it is conceivable that the UK government could incentivize airlines to accelerate climate action by providing financial support linked to decarbonization progress during the demand-management period. Airlines performing well could also see demand-management policies relaxed sooner, if they make sufficient decarbonization progress.
4.4 Demand-management policy options
This research paper has focused on the balance between supply-side decarbonization and demand management options. It is out of the scope of this research to fully examine the policy mechanisms to achieve the level of demand management required. However, it is instructive to investigate the type of policies that may be needed, including reform to existing policies such as air passenger duty (APD), fuel duty, value added tax (VAT), carbon pricing and offsetting schemes. In addition, new policy options include the introduction of a frequent flyer levy and reducing the availability of flights via management of airport capacity.
In various scenarios the CCC considers demand reduction to be an important element of decarbonization and explores all policy options in delivering demand management, which in the widespread engagement scenario of the CCC sixth carbon budget shows passenger demand declining by 15 per cent in 2050, relative to 2018. In June 2022, the CCC published its progress report to parliament, in which it called for the UK government to ‘Implement a policy to manage aviation demand as soon as possible so the mechanisms are in place in the likely event that low emission technology are not commercially available to meet the Government’s aviation pathway’.
4.4.1 Air passenger duty
Since 1994, all passenger flights from UK airports are subject to APD, with some exemptions (e.g. for connectivity flights to remote islands within the UK). The rates vary depending on the class of the ticket and distance. Rates from April 2023 for economy class are £13, £87 and £91 for short-, medium- and long-haul flights, respectively.
Studies investigating the effects of taxation on demand for flights are limited. In 2018, a survey-based contingent valuation method study investigated people’s willingness to pay (WTP) APD. The mean WTP for short-haul flights was found to be £16.54 in economy class and £24.11 in business class. For medium- and long-haul flights, the mean WTP ranged from £22.89 to £36.80. At the time of the study, the economy class ADP rates were comparable to those of 2023. Based on the 2018 APD rates, the study concluded that ADP rates for medium- and long-haul flights may largely decrease demand from the ‘average tourist’ who is ‘prepared to accept the current APD rate for short-haul trips’. Furthermore, this study investigated demand elasticities for six trip scenarios, finding that: short-haul tourist demand is inelastic for APD below £37.51, for long-haul flights tourist demand becomes highly elastic above £52.51, and that WTP is higher for business class than for economy class. It should be noted that this study mainly targeted holiday travellers and suggested that future research could include business travellers.
4.4.2 Fuel duty and VAT
Unlike petrol and diesel for road transport, which incurs excise duty and constitutes a significant portion of the pump price paid by motorists, aviation kerosene for both domestic and international flights is untaxed in the UK.
Countries such as the Netherlands and Norway have implemented kerosene taxes on domestic flights within their jurisdictions. The introduction of fuel duty on all UK flights may inadvertently incentivize carriers to engage in ‘tankering’ to avoid paying taxes. By filling their aircraft to capacity whenever they touch down at international destinations, airlines could bypass the fuel duty tax. In turn this could increase the level of aviation emissions, counteracting the intended environmental benefits of taxation.
The VAT applied to flight tickets from UK airports is zero rated. This tax treatment places flight tickets in a category alongside various essential goods and services such as water, most food, children’s clothes and wheelchairs. By placing flight tickets in this category, air transportation is in essence being treated as a necessity rather than a luxury. The UK, Ireland and Denmark are the only European countries that do not apply VAT to domestic flights.
4.4.3 UK Emissions Trading Scheme
The UK launched its own emissions trading scheme (UK ETS) in January 2021 to replace the country’s participation in the EU Emissions Trading Scheme (EU ETS). To ensure stability for participating companies, the initial phase of the UK ETS has been designed to align with the EU ETS until 1 January 2024. The UK ETS encompasses energy-intensive industries, such as aviation, including UK domestic flights as well as UK flights to European Economic Area states, Gibraltar and Switzerland. The cap-and-trade scheme enables emitters to buy and sell a decreasing number of carbon emission allowances. In 2021, the UK government provided UK airlines with a surplus of free allowances, resulting in a direct subsidy from the British taxpayer to the industry. The total number of free allowances distributed amounted to 4.4 million, valued at £242 million based on the average 2021 UK ETS price of £55.59. However, only 3.4 million allowances were required to cover airline emissions. This created an excess of allowances that airlines could sell on the secondary market. In 2022, the UK government continued to give away free allowances to airlines, estimated to be worth more than £300 million. In July 2023, the UK government released many more permits than had been expected, contributing to a crash in the traded UK carbon price, which at the time of writing (August 2023) was running at a 45 per cent discount relative to prices under the EU ETS.
The rationale behind allocating free allowances is to prevent carbon leakage, which refers to the risk of emissions-intensive industries relocating their operations to regions with more lenient emission regulations. However, the aviation industry poses minimal risk of carbon leakage, making the distribution of free allowances unnecessary in practice; unlike manufacturers, airports and airlines cannot simply relocate operations to another jurisdiction. Thus, under the UK ETS, the provision of free allowances has effectively functioned as a transfer of funds from the British taxpayer to the airline industry. The Transport and Environment group, which campaigns for clean transportation, has called for free allowances to be completely withdrawn from 2024, and for the scheme to be applied to all departing flights, regardless of destination. The Aviation Environment Federation has also called for an end to free allowances, and for the current practice of assuming a 100 per cent emissions reduction under the ETS for CO₂ from SAFs to end.
4.4.4 CORSIA: the multilateral approach to aviation decarbonization
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global initiative aimed at mitigating the growth of CO₂ emissions from international aviation. The pilot phase started in 2021 and will run until the end of 2023; it will be followed by a first phase (2024–26) and a second phase (2027–35). Participation is voluntary during the first two phases, but from 2027 onwards participation will be determined based on 2018 revenue tonne kilometre (RTK) data – one RTK is created when a metric tonne of revenue-generating load is carried one kilometre. CORSIA requires airlines to purchase carbon offset credits for the international flights they provide. Offset projects aim to reduce or store GHG emissions, for example renewable energy projects, or prevent deforestation, to compensate for emissions elsewhere.
In 2016, the EU determined that only 2 per cent of CDM projects had a ‘high likelihood’ of delivering CO2 reductions.
The UN’s clean development mechanism (CDM) is the world’s largest and oldest offsetting scheme. In 2016, the EU determined that only 2 per cent of CDM projects had a ‘high likelihood’ of delivering CO₂ reductions. In 2019, an assessment of the first 14 applications of offsetting programmes under CORSIA ‘hardly meet any of the requirements and may not even be considered carbon-offsetting’, and ‘most programs do not yet have procedures in place or planned for avoiding double counting’.
In voluntary carbon markets, companies utilize carbon offsets to fulfil self-defined emissions reduction targets. These offsets are typically issued in accordance with independent crediting standards, although some entities may also procure them through international or domestic crediting mechanisms. However, there is increasing scepticism over the effectiveness of these voluntary carbon offsets and doubts over whether they offset emissions at all.
While new rules under Article 6 of the Paris Agreement are designed to achieve credible approaches to both offsetting and the establishment of international compliance carbon markets, these examples indicate the challenges offsetting faces, and concerns remain over double counting – when carbon credits are claimed by more than one entity. Furthermore, a 2022 study investigated CORSIA’s emissions reduction potential, utilizing registry data from the largest carbon offset verifiers eligible under CORSIA. This study drew similar conclusions to that of the 2019 assessment. Namely, that ‘the majority of carbon offsets have minor climate integrity’, and that to ‘increase environmental effectiveness, a narrower scope of eligibility rules is necessary’. The study also questioned if future, tighter eligibility rules could improve the prospects of CORSIA – ‘it is highly questionable whether there is enough potential supply of offsets to ensure such high integrity, indicating that carbon offsetting should be considered as a transitory measure only’.
This research paper is not attempting to put forward options that oppose existing multilateral frameworks. Rather, given the concern that CORSIA may be inadequate, the severity of climate risks and how soon these are likely to manifest, the demand management policy options discussed are an attempt to indicate what more could be done.
4.4.5 New policy options: management of airport capacity and a frequent flyer levy
The complexity of the tax policy landscape surrounding aviation in the UK, encompassing APD, UK ETS and CORSIA, presents challenges. Critics contend that the current treatment of aviation fails to achieve the necessary demand transformation to address the climate crisis effectively. Furthermore, given the prime minister’s recent pledge not to introduce ‘new taxes to discourage flying’, under the current UK government any change in the tax passengers pay appears unlikely in the near term. Additionally, potential subsidies provided to the sector continue to raise concerns, particularly considering the free allocation of credits under the UK ETS and the support received during the COVID-19 pandemic.
The CCC allows for 25 per cent growth in aviation passenger numbers on 2018 levels under its balanced net zero pathway, and a decline of 15 per cent under the widespread engagement scenario. Furthermore, the CCC states that, ‘There should be no net expansion of UK airport capacity unless the sector is on track to sufficiently outperform its net emissions trajectory and can accommodate the additional demand’. However, current planned and recently approved airport expansions will result in nearly three times the passenger numbers under the balanced net zero pathway.
The idea of a frequent flyer levy has been around since at least 2015, with the tax paid by a passenger increasing with the number of flights, or the distance travelled. In its simplest terms, a passenger taking their third flight of the year would pay a higher tax on that flight than someone taking their first. When Climate Assembly members were asked, what considerations should government and parliament bear in mind when making decisions about air travel and the path to net zero? The fourth most voted for consideration for the UK government was that frequent flyers and those that fly furthest should pay more, with 44 per cent of assembly members choosing this measure as a priority.
A frequent flyer levy could also make access to air travel fairer, as the increased tax for those who fly most frequently could incentivize them to make the biggest reductions. As a 2022 paper concludes, both a frequent flyer levy and a carbon tax could reduce emissions, but a frequent flyer levy is more progressive and effective at reducing emissions. Another recent paper concluded that while a ‘frequent air miles’ tax is the most progressive option, recent migrant families could be impacted more than other low-income groups.
While not directly translatable in terms of being proxies for success, both the soft drinks industry levy and plastic bag tax in the UK are widely accepted as being successful. The Institute for Government highlights that between 2015 and 2019, the sales-weighted average sugar content of soft drinks declined by 43.7 per cent, with 17 per cent of reductions being driven by consumers switching towards lower-sugar drinks. And the relatively modest penalty of 5 pence on plastic bag use has reduced plastic bag usage by 97 per cent since 2015.
In terms of the effectiveness of changing behaviours, clearly the level of any tax or levy would need to be appropriately set. Under the most recent frequent flyer levy proposal, produced by the New Economics Foundation (NEF) and climate charity Possible in 2021, a passenger would be charged no tax on the first return leisure flight they take in a year, increasing to £25 on the second, £60 on the third, all the way to £585 on their tenth flight of the year. For business passengers, the first flight would start at £25. NEF modelled these levy rates based on limiting air passenger demand to 25 per cent above 2018 levels. Under NEF’s proposals the frequent flyer levy would replace the APD, but retain the exemptions (e.g. to remote islands). As such, passengers who only fly once a year would see a small decrease in the cost of their tickets, enabling greater access to air travel to the UK’s poorest households. NEF also projects that this frequent flyer levy would result in the top fifth of earners flying around 30 per cent less, with the lowest fifth of earners flying very slightly more. A peer reviewed study published in August 2022 indicates that a frequent flyer levy would be the most distributionally progressive option for managing demand through taxation.
UK government polling published in June 2021 showed significant support for a frequent flyer levy, with 27 per cent of participants answering ‘strongly support’, and 27 per cent answering ‘somewhat support’, compared with 11 per cent and 8 per cent ‘somewhat opposed’ and ‘strongly opposed’, respectively. Research in 2021 by Ipsos and the Centre for Climate Change and Social Transformations has also found that over two-thirds of the UK public support a frequent flyer levy, the highest level of support for any of the eight key net zero policies they tested. However, a frequent flyer levy introduced in isolation would be insufficient to achieve the future demand management goals. If implemented, a levy would need to be accompanied by other measures, such as a kerosene tax, to avoid distortions.
An aviation sector-backed report estimates that between now and 2050 an annual average investment of $175 billion will be required to enable the aviation sector to meet the net zero target. The implementation of a frequent flyer levy could go a significant way to raising this level of investment. The International Council on Clean Transport (2022) has shown that $121 billion could have been raised in 2019 alone with a flat $25 tax on one-way flights, or by implementing a frequent flyer levy of $9 for each person’s second flight, increasing to $177 for their twentieth within the same year.
If the UK government were to pursue demand management via a frequent flyer levy, the additional tax generated could be utilized to support airline workers in obtaining new employment. Furthermore, as the New Economics Foundation highlights, a frequent flyer levy is likely to ensure the best protection of airline jobs outside of London and the Southeast. Clearly, given Rishi Sunak’s recent announcements promising not to introduce new aviation taxes, the introduction of a frequent flyer levy will not occur unless there is a change in government or government policy.
4.5. What about the aviation sector in other high emitting countries?
As the IEA’s net zero scenario has highlighted, even if the global aviation sector deploys all supply-side decarbonization measures, some demand management will be required to keep within 1.5°C. Indeed, the majority of the sector emissions reductions assumed by the IEA out to 2050 are derived from reductions in demand, primarily for long-haul business flights. And as the IPCC have highlighted, the ‘avoid’ potential for individuals choosing to reduce long-haul aviation is slightly more than 1.7 tCO₂ per person, globally.
