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It's time the price of flying reflected the true cost

The contribution of airplane emissions to climate change is well documented. At any given time, there are around 10,000 passenger aircraft in the sky, carrying over one million people. hat's at any time of day, every day.

Few other human activities are more intensely polluting than flying. Yet rather than being hammered, the aviation industry instead benefits from tax breaks and subsidies of which other sectors could only dream. For example, the Irish Government is committed to spending at least €320 million on new runway at Dublin airport – another significant subsidy to the sector. Jet fuel, due to an antiquated international agreement from 1944, is completely exempt from tax and duties. Taxing it at a modest rate of 33 cent per litre would generate nearly €10 billion in revenues within the European Union. Airline tickets are, bizarrely, VAT-exempt. Raising this to 15 per cent (which would be favourable compared to the standard rate in Ireland) would bring in another €17 billion annually.

Social Justice Ireland has another proposal for how the aviation industry might make a contribution to society that better reflects the harm it does while ultimately incentivising individuals to fly less. Since April 1st 2018, airlines and business air charter companies with flights from Sweden will have had to declare and pay the Swedish Aviation Tax – a tax on commercial air transport. It is levied on commercial flights carrying passengers and departing from a Swedish airport. It applies only to aircraft with a seating capacity greater than 10 and aircraft used for private, non-commercial transportation is exempt.

The rate of the charge depends on the passenger’s final destination. Broadly speaking, passengers travelling to desintations close to Sweden pay less than those traveling further afield.

Too often it is the case that the reliance of policymakers on market forces to shape society leads to inefficient or unfair outcomes. However, when it comes to climate change and environmental sustainability, these same market forces have the potential to be exceedingly useful. All that is required is a small amount of government intervention to ensure that the price of a good, of a certain type of behaviour, or of a certain consumption pattern reflects the true cost – not just the cost of production or provision but of the overall cost to society; the so-called externalities.

Such price-side intervention can encourage more sustainable patterns of behaviour and raise revenue that can be used to subsidise and promote environmental causes. There is a clear need to ensure that the cost of air travel to consumers reflects not just the cost of running a flight but of the external cost as well. It is well-known that air travel is a significant polluter. The principle of ‘polluter pays’ demands that more of the burden of this pollution should be experienced by those who benefit from air travel – only a very small proportion of people can afford to travel by plane.

Social Justice Ireland proposes an aviation tax in line with the Swedish model. A tax applied in such a manner would have raised around €200m in 2018.

Some key features of this proposal include:

  • From January 1st 2020, airlines and business air charter companies operating in Ireland must declare and pay a per-passenger charge on all commercial flights, with a seating capacity greater than 10, departing Irish airports;
  • Aircraft used for private, non-commercial transportation are exempt;
  • The rate of the charge will depend on the passenger’s final destination, and is outlined in the table below;
  • Children under the age of two are exempt;
  • Flight crew on active duty are exempt;
  • Flights following a tech stop, or returning to the departure airport due to bad weather, mechanical failure or any other unforeseen events are also exempt;
  • Airline operators must register for the tax by December 31st 2019;
  • Airline operators must submit monthly tax declarations and make payment of the tax by the 21st day following the month to which the tax pertains.

A tax applied in such a manner would have raised €196m in 2018. The number of passengers being handled by Irish airports has increased by an average of 8.5 per cent over the last 4 years. Even if this rate slows substantially, €210m could be expected in revenue in 2020, assuming no behavioural change.

Social Justice Ireland acknowledges that even with the addition of these comparatively small fare increases (we assume that airlines will pass these fees on to passengers) airline prices will not properly reflect the true cost of flying. We therefore proposes that these rates be a base from which fees would be gradually increased over the coming years.