UN climate change financing report set to recommend international aviation tax to help developing countries

UN climate change financing report set to recommend international aviation tax to help developing countries

Mon 25 Oct 2010 – According to The Times, a new global tax on airline tickets could be imposed as part of plans to raise $100 billion a year to provide finance to help developing countries mitigate their greenhouse gas emissions and adapt to climate change. The UK newspaper claims to have seen a draft report by the High-level Advisory Group on Climate Change Financing (AGF), set up by UN Secretary-General Ban Ki-moon in February, which estimates such a tax could raise up to $6 billion a year. The report has concluded that air travel would be an important source of climate funding because, says The Times, it was generally lightly taxed but one of the fastest growing sources of greenhouse gases. The report also suggests intra-EU flights could be excluded because their carbon emissions are to be covered by the Aviation EU Emissions Trading Scheme (EU ETS).


According to the newspaper, a tax would be imposed on all international flights. Half of the amount would be retained by the countries where the tax was paid, and the other half paid into the new climate fund.


Other sources of funding are proposed to come from a tax on shipping fuel, global financial transactions, emissions trading auction revenues and diverting some royalties from extracting fossil fuels.


The report is due to be published during November, in time for the UNFCCC COP 16 climate talks in Cancun, Mexico, which start on 29 November.


The mobilization of climate change financing for developing nations is seen as key to reaching a global climate agreement and the AGF has been studying options for potential sources of finance. The group was set up after the Copenhagen Accord, in which developed countries committed to the goal of mobilizing $100 billion a year by 2020 to help the poorest and most vulnerable states.


The guiding principles of the group included equity considerations, as reflected in the common but differentiated responsibilities and respective capabilities (CBDR) principle, as well as criteria for revenue, efficiency, incidence, practicality, acceptability, reliability and additionality. The financing is also intended to mobilize investment and a shift towards lower carbon-emission and climate-resilient economies in developing countries, triggering economic growth, with due consideration of the pressure of constrained budgets on the developed world.


The group is co-chaired by the prime ministers of Norway and Ethiopia and its members include the financier George Soros, UK economist Lord Nicholas Stern and President Obama’s chief economic policy adviser Larry Summers.


The AGF believe the greatest potential for revenue contribution is from auctions of emissions allowances and new carbon taxes. Given a carbon price of $20-25 and assuming up to 10% earmarking of total revenues, such sources have the potential of generating around $30 billion a year.


Tim Johnson of the Aviation Environment Federation (AEF) understands the report to have considered three options for aviation: a global ETS with revenues from auctioning, a fuel tax and a passenger levy, with a preference for an ETS followed by a fuel tax. However, these may prove more difficult to implement from a political perspective, so it regards the ticket tax as the most feasible option in the short term.


Johnson believes the AGF proposal exempts intra-EU flights – “supposedly because of the EU ETS, but it begs the question, why only intra-EU?” – and all domestic flights and those between developing countries.


“As for our stance, we have always stated that low to moderate ticket taxes alone will not reduce aviation emissions and need to be considered as part of an overall package,” he said. “But we have argued that revenues should be used, at least in part, for general climate financing as the gains may be greater than spending it in a sector with high abatement costs. So we welcome this link in the AGF report.”


Johnson added that the report states the involvement of ICAO was essential, although the AEF would support initiatives outside ICAO if the organization could not deliver. “Given the recent ICAO Assembly outcome, and the likely absence of a global measure for aviation in the short- to medium-term, we are in that scenario,” he said.


Despite the lengthy negotiations over international aviation’s efforts on climate change, states attending the Assembly did not consider a global ticket levy.


The issue of a global tax or levy on international airline tickets is not a new one and has been put forward within the UNFCCC process by some Small Island Developing States (SIDS) and Least Developed Countries (LDCs). The Maldives has proposed a levy that would add $6 to an economy class ticket and $62 on a premium class ticket. This would raise an anticipated $8-10 billion annually without, it claims, affecting demand significantly.


However, any linkage between climate financing and bunker (international aviation and shipping) fuels has so far been firmly resisted by both the United States and the major emerging nations.


The levy proposal has also been opposed by the airline industry on the grounds that it would be another so-called environmental tax that would offer no assistance or incentive in reducing aviation emissions.




UN Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF)



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