ATA calls on US Government to resist growing demands for an international air tax to fund climate adaptation
(photo: Maldives Airports Co)
Tue 3 Nov 2009 – Growing industry fears that an international air passenger adaptation tax could be levied to provide funds to help the least developed countries cope with the effects of climate change has prompted the Air Transport Association of America (ATA) to call on US climate negotiators to oppose the measure. The International Air Passenger Adaptation Levy was originally proposed by the Maldives on behalf of the Group of Least Developed Countries (LDCs) at last December’s UNFCCC meeting in Bali. The levy would place a two-tier charge, based on class of travel, on an international flight ticket and would be expected to raise between $8 billion and $10 billion annually.
In an open letter to Todd Stern, the US Special Envoy for Climate Change, the ATA urged the United States to support the aviation industry’s global sectoral approach proposal and oppose what it described as an “exorbitant” tax.
“The proposed tax would unfairly and unreasonably target one industrial sector, a sector that has a tremendous fuel and greenhouse gas efficiency record, to the detriment of the economy,” said ATA President and CEO James C. May.
“Even though US airlines account for less than 2% of the US greenhouse gas inventory, we are committed to doing more. However, this hefty new tax would be counterproductive, siphoning away to the developing countries the very funds that the US airlines need to continue to invest in new aircraft, retrofits, alternative fuel and other upgrades critical to the airlines’ environmental performance and the US economy,” said May. “We should not be considered a piggy bank for developing countries.”
The LDC proposal is based on a French ‘solidarity’ levy that was established to provide funds to fight pandemics, including access to anti-retroviral treatments for HIV/AIDS. The French scheme, which started in July 2006, began collecting an ‘international solidarity contribution of €1 ($1.46) on all European economy class tickets (€10 in business) and €4 on international economy class tickets (€40 in business). It was expected to generate annual revenues of €200 million ($293m).
A declaration signed by 79 countries (including the UK, excluding the US and Australia) in September 2005 encouraged further work on such solidarity contributions, with the UK stating that it would allocate a proportion of the revenue from the existing Air Passenger Duty (APD) for health development projects including HIV/AIDS, tuberculosis and malaria.
In October 2006, two senior researchers at the Oxford Institute for Energy Studies, Dr Benito Müller and Dr Cameron Hepburn, published a paper outlining how such a solidarity levy on air passengers could help provide a solution to the challenge of raising adaptation finance, and also addressed how it might be used to help address aviation emissions reductions. The paper argued that such a levy was compatible with the UNFCCC principle of common but differentiated responsibilities and respective capabilities in that it reflected the personal responsibilities of flying passengers and their ability to pay for international travel, plus was in accordance with the ‘polluter pays’ principle.
Basing their own proposal on the Oxford paper, the LDCs have used the French formula to come up with a similar levy of $6 per economy class international trip and $62 per business/first class trip. Using IATA traffic forecasts and assuming a 99% collection efficiency, the levy is estimated to raise $8-10 billion in the near-term. The levy would be collected at source by airlines, which would be reimbursed for the administration costs, and the revenues going to the Kyoto Protocol Adaptation Fund, which currently receives 2% of all revenues generated by the Clean Development Mechanism.
The ATA letter was prompted by information reaching the airline representation body that certain European countries had indicated a willingness to make a deal on the levy proposal in the lead up to the Copenhagen conference next month. “ATA felt it was a good time to refresh the US Government and others regarding our concerns about the prospects of pinning such an obligation on the backs of aviation,” an ATA spokesperson told GreenAir Online.
Last week, an EU summit agreed that €100 billion ($146bn) per year should be contributed by the developed world to help developing nations fight climate change. However, EU leaders could not decide how much should be contributed by Europe – a figure of €22-50 billion was suggested – and also the amount from individual EU States. Financing climate change mitigation and adaptation is currently proving to be a major obstacle in the Copenhagen process.
However, Damian Ryan of international NGO The Climate Group said that although the LDC levy had gained a high profile in UNFCCC meetings and had the support of many NGOs he did not foresee it becoming a leading proposal. “As far as I’m aware, none of the major players such as the US, China and the EU back it, and without their support it’s not going to fly,” he said. “However, it does have a certain degree of moral weight, and the idea that aviation (and maritime) could provide a source of international climate funding is certainly not an issue that’s going to disappear, especially as financing is one of the key deadlock issues in the negotiations.
“From our perspective, a levy isn’t the best mechanism for addressing aviation’s climate impact. It doesn’t guarantee any emission reductions, unlike an emissions trading scheme, which could also deliver revenue flows for adaptation through the auction of emission allowances. To be fair to the LDCs, however, their main objective is not to address aviation’s climate impact, but to raise revenue for their main climate priority – adaptation – and they’ve been upfront about this. In short, the LDC proposal is a financing one, not an aviation one.”
Tim Johnson of the Aviation Environment Federation agrees. “We are not against the levy, providing a target for aviation is also adopted that would provide justification for further measures in parallel,” he said. “On its own we feel it will take away all political momentum to tackle aviation and the risk is that the level of the levy will not be sufficient to reduce emissions.”
According to the LDC proposal, the proposed levy would not have the purpose of having a significant effect on passenger numbers – less than a tenth of the expected annual growth rate, it anticipates – as the LDCs are anxious to have minimal impact on tourist dependent economies. On the contrary, they see it having a positive impact on the development of the poorest and most vulnerable countries and communities in the face of the effects of climate change.
However, the International Air Transport Association (IATA) disagrees and believes the proposed levy would potentially damage the tourism revenue on which many LDCs and island nations such as the Maldives rely.
“Aviation plays a vital role in the sustainable development of many of these nations – it should remain accessible to as many sections of society as possible,” said IATA’s Quentin Browell. “An adaptation levy would deny air travel to increasingly large parts of society, especially in LDCs.”
He said other governments have made proposals for raising adaptation money that take a more equitable and comprehensive approach, without singling out any specific economic sector. “For example, Mexico has proposed the creation of a multilateral climate change fund, to which all countries would contribute, in accordance with CBDR,” he said. “Norway has proposed raising revenues from a global auction of a certain percentage of national emissions allocations (AAUs) and Switzerland has proposed a $2 per tonne CO2 levy on all fossil fuel emissions, with exemptions for LDCs.
“If governments introduce an adaptation levy that includes aviation, the revenues raised from aviation must be primarily used to cover aviation’s carbon costs. To achieve this, governments could, in return for annual payments by aviation, issue the sector with ‘global aviation allowances’ up to a maximum of the sector’s total annual CO2 emissions. Creation of extra allowances for international aviation emissions would be needed anyway to include these emissions in the post-Kyoto framework.
“To ensure that aviation will only be held accountable for its emissions once, these global aviation allowances would be valid for emissions compliance purposes anywhere in the world.
“Alternatively, revenues raised by aviation must be ploughed back into aviation-related projects aimed at mitigation and adaptation measures such as research, development and deployment of green aviation technologies and operations; research, development and deployment of sustainable biofuels for aviation; and implementation of new airport and airspace infrastructure to adapt to climate change impacts.
“Consideration could also be given to channeling a percentage of the revenues raised from an aviation adaptation levy to the Kyoto Protocol’s Adaptation Fund.”