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Research Report

HOW CAN AIR TRAVEL CONTRIBUTE TO THE COSTS OF ADAPTING TO CLIMATE CHANGE?: The feasibility of the International Air Passenger Adaptation Levy (IAPAL) as a market governance mechanism

Antonia Custance Baker
Copyright Date: Jan. 1, 2011
Pages: 44
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Table of Contents

  1. (pp. 06-07)

    Globalisation’s expanding frontier has seen markets become the overriding mechanism for facilitating the exchange of goods and services, with increasing implications for public goods. The contribution of markets to sustainable development remains uncertain because of market failure, because benefits and losses accrue to different players differently, and because sustainable development objectives have not yet become integral to market governance. For instance, increased demand for biofuels may lead to increased incomes for some people, but may also affect the price and availability of food for others as land is reallocated from food production to cash crops.

    Increasingly, however, to deliver specific...

  2. (pp. 08-09)

    Aviation has been the focus of much environmental debate, and currently contributes 3.5 per cent of total anthropogenic emissions of carbon dioxide (CO2) (or 4.9 per cent when air-induced cloudiness¹ is included) (Lee et al., 2009). This exceeds the total CO2 emissions of France or Australia. Aviation is one of the highest growth sectors, and global emissions of CO2 from air transport grew by 96 per cent between 1999 and 2005, reaching an estimated 673 million tonnes in 2007. The Intergovernmental Panel on Climate Change (IPCC) has estimated that CO2 emissions from the aviation sector will be 1.6 to 10...

  3. (pp. 10-17)

    The key assumptions of the Müller and Hepburn (2006) proposals for an International Air Travel Adaptation Levy (2006) are as follows:

    The expected cost of adaptation exceeds the pledged sources of funding available — therefore new sources of funding are required.

    The global demand for flights is not significantly affected by small price increases and therefore an additional tax would not dramatically reduce demand. This would therefore avoid reducing the amount of revenue available and would not have a serious negative impact on the industry.

    The revenue raised would be high enough to make a significant contribution to global adaptation...

  4. (pp. 18-29)

    This section looks at the current status of international agreements. It covers the UNFCCC negotiations, the role of the International Civil Aviation Organization (ICAO), the European Union Emission Trading Scheme (EU ETS) and a case study of a UK per-passenger levy — the Air Passenger Duty (APD). The aim is to test whether the introduction of IAPAL is feasible given the current structure of existing market governance mechanisms, and the political, social and economic contexts in which it would operate. The UK was chosen as a case study to follow on from the original Müller and Hepburn (2006) paper and...

  5. (pp. 30-37)

    For the IAPAL scheme to be feasible, it must be accepted by several stakeholder groups with considerable influence and lobbying power at both national and international levels. Opposition from these groups could seriously hinder the acceptance of IAPAL as part of an international binding agreement. This section looks in turn at the interests and influence of four groups: airline companies, the tourism sector, environmental groups, and the public in developed countries.

    Unsurprisingly, many airlines are opposed to increased taxation on air flights. Airlines and manufacturers objected explicitly to fuel taxation and explained that they already had an incentive to minimise...

  6. (pp. 38-39)

    This paper has aimed to analyse the IAPAL idea as a potential innovative market governance mechanism. It has done this first by examining the key assumptions laid out in the original analysis by Müller and Hepburn (2006). Comparing required adaptation funding against available and pledged sources of such funding, new and additional sources of funding are very much needed. Aviation is a sector with a relatively low price-elasticity of demand. This makes taxation an unsuitable method of reducing demand (a mitigation strategy), but indicates that it could be a suitable method of raising revenue (an adaptation strategy). It also demonstrates...