Increasing air passenger taxes as a means to reduce carbon emissions de-democratises air travel and is an ineffective tool unless they are also tied into a carbon offsetting programme, said, Sean Newsum, director of environmental strategy for Boeing’s Commercial Airplanes.
Germany will increase short-haul flight passenger departure tax by 75 percent in April this year, with other European governments also mulling similar proposals. However, responding to a question from Airline Economics at a press briefing in London on January 31, Newsum said that the main impact of such moves would be to reduce the ability of less-well off passengers to travel, rather than stymie carbon emissions.
“Certainly, we want people to be able to afford to fly and the people who are hit first and foremost by the increase in aviation taxes are the ones for which air travel today is only marginally affordable. So, it will de-democratise air travel if taxes go up.”
The German tax rises will be recycled into reducing domestic train fares, and while not directly referring to European country’s move, Newsum said that without linking increases to schemes which directly reduce carbon emissions - train travel is currently roughly equivalent to aviation in terms of Co2 emissions - the overall environmental impact will be limited.
“The effectiveness of a tax in terms of reducing Co2 emissions is very low, when all that is being done is raising the cost of air travel and incrementally suppressing demand. A more effective means is to tie that economic instrument into a carbon emissions reduction method, as we are doing with carbon offsetting
The benefit of carbon offsetting approach is that the fees that are paid into an emissions reduction programme, and have a direct emissions benefit, rather than simply raising the cost of air travel. What we are really trying to do is reduce Co2 emissions, not people’s ability to fly.”
Wendy Sowers, who heads up market & product forecasting at Boeing Commercial Airplanes, adds that demand for air travel was not entirely price elastic and pointed to the continued growth of air travel in the early 2000s, despite the prices of oil quadrupling from $25 a barrel to over $100, ahead of the 2008 Financial Crisis.
“There was really strong traffic growth during that time despite the fact that oil prices went up that much. An economist will talk about price elasticity but most of the time there are other factors that drive demand growth - during that period there was very strong economic growth, and prices went up across the board, so it wasn't one airline against another.”
The aviation market is global, and the world as well as being in different stages of economic development, and maturity and so the growth that we are seeing from Asia is on a different part of the S curve of the industry compared to Europe and North America. And those factors will also play a role in demand for aviation.”