Further memorandum from the Aviation Environment
Federation
TAKING ACCOUNT OF THE ENVIRONMENTAL COSTS
OF AVIATION: EXAMPLES OF MEASURES INTRODUCED, OR PLANNED, IN OTHER
COUNTRIES
INTRODUCTION
The AEF supports the principle of internalising
the environmental costs of aviation. At present, with the exception
of local noise charges at some airports, this does not happen
in the UK through the application of economic instruments.
This supplementary evidence provides examples
of economic instruments applied in other countries to tackle aviation's
environmental effects.
BACKGROUND
One of the reasons as to why aviation does not
meet its external costs, is the absence of any tax on kerosene.
The interpretation given to Article 24 of the Chicago Convention
of 1944, is that it prohibits the imposition of taxes on fuel
kept on board aircraft and consumed on international flights.
This has been reinforced by its incorporation into bilateral air
service agreements worldwide.
However, taxation of fuel used on domestic flights
is permitted. We understand that the EU is currently drafting
an Energy Products Directive that is likely to reinforce this
position. Furthermore, as drafted, it permits member states to
enter into a bilateral agreement to tax the fuel used by carriers
operating between those countries. We view this as a welcome step
towards the goal of a lifting of the worldwide fuel tax exemption
afforded to international air transport.
The rest of this evidence focuses on specific
economic instruments that have been applied to address aviation's
environmental effects. This paper is not intended to provide a
comprehensive assessment of where economic instruments have been
applied. Instead, with reference to examples, it highlights the
scope for applying economic instruments.
LOCAL MEASURES
(a) Noise-related Charges
The purpose of noise charges is to recover the
costs applied to the alleviation or prevention of noise problems
around airports.
This has led to two basic approaches to noise-related
airport charges. The first approach seeks only to promote the
use of quiet aircraft by varying landing fees according to noise
performance, permitting quieter aircraft to receive a discount
on the applicable landing fee, while noisier aircraft pay more.
The schemes are revenue neutral.
The second approach is a more direct means of
cost recovery, where airports (and in some cases governments)
levy a surcharge to specifically meet the costs of implementing
a noise mitigation programme. In most cases these are a surcharge
on the landing fee. The charges are structured to be revenue neutral
(ie they raise no more than the cost of the noise projects being
undertaken) and frequently combine the first approach so the charge
relates directly to the contribution of each aircraft to the overall
airport noise exposure (again, creating an incentive for the operation
of quiet aircraft).
There are several common types of charging system:
— Charges based on certificated or
actual noise data.
— Scale of charges based on aircraft
weight and noise performance (this is easy to calculate since
most airport landing fees are already based on aircraft weight).
— A fixed charge per decibel above
a maximum permitted noise level at a specified distance from the
airport.
— A charge, often used in combination
with the above, for night operations or sensitive times.
— Fixed passenger charge (for example,
Sydney airport where each international passenger can pay AUS$3.40—this
is a commercial charge that is being imposed by individual airlines
at their discretion to recover the costs they incur in paying
the airport noise levy).
In the Netherlands, the Aviation Act requires
houses exposed to higher noise levels to be sound-proofed. The
costs of these programmes are recovered through noise related
charges. However, in addition to the noise charge that may be
imposed by the airport, there is an additional Governmental noise
charge. The Governmental noise charge has two elements. The first
is constant for all aircraft and relates to the expected annual
cost of the sound-proofing programme (this can be adjusted annually).
This constant is then multiplied by noise performance of the individual
aircraft (based on noise certification levels) in order to obtain
the charge.
In the US, planning for aviation noise compatibility
on and around airports is guided by Federal regulations, most
notably Part 150, Airport Noise Compatibility Planning. Under
this regulation, airports must prepare Airport Noise Compatibility
Programs (NCPs) for approval by the Federal Aviation Administration
(FAA). The airport submits a series of measures to mitigate the
airport's noise impact with the aim of reducing or limiting non-compatible
land uses around the airport and of preventing the introduction
of additional non-compatible land uses. Such measures may include
land use controls, building codes, soundproofing, acquisitions
and relocations. Noise mitigation projects necessary to implement
an NCP are generally eligible for federal funding through the
Airport Improvement Program and using grants from the Aviation
Trust Fund which is itself sustained by "an advalorem plus
flight segment tax on tickets", and by taxes on fuel (for
general aviation) and on air cargo. This ensures that the monetary
cost of the programs "is largely paid for by those who benefit
from aviation service". It is, in effect, a form of hypothecated
tax.
Revenues are generally used for land/property
acquisition, soundproofing of noise sensitive buildings, provision
of noise barriers, provision of noise monitoring and track keeping
equipment, and other community benefits.
(b) Emissions
Zurich Airport has implemented an emission charge,
based on engine emissions and performance parameters, for many
years. It is a "revenue-neutral" landing and take-off
charge. The charge is based on the NO pollution class of an airplane's
engine. Five pollution classes are linked to a charge that varies
between 0 to 40% of the landing fee. The revenues are used to
cover expenses related to aircraft emission reduction programmes.
The charge is revenue-neutral because the revenues for the airport
remain unchanged as the general landing fee has been reduced by
5%. According to the airport, the aim of the charge is not to
make aviation more expensive, but to give airlines flying to Zurich
Airport an incentive to fly with cleaner aircraft. The most polluting
aircraft pay 40% extra on their landing fee while the "cleanest"
planes get a 5% reduction.
Sweden has also introduced emission charging
in the form of emissions-based landing charges. The system applies
to aircraft with a maximum take-off weight of over 9 tonnes, and
airports with more than 300,000 passengers or 30,000 tonnes of
freight per year. The system of charges is based on a classification
of aircraft emissions during the landing-take-off (LTO) cycle.
Information on aircraft emissions are provided by the airlines
and based on ICAO statistical material. Aircraft emissions of
hydrocarbons and nitrogen oxides determine are divided into seven
categories. Engines generating the least emissions are in Class
6, and those generating the most emissions are in Class 0. Depending
on the classification, a supplement ranging from 0% to 30% is
added to the aircraft landing charges.
The European Civil Aviation Conference has recently
designed a common classification system for emissions-based landing
charges in Europe, known as ERLIG.
GREENHOUSE GASES
Switzerland applies a carbon tax to domestic
flights.
Norwegian aviation charges: On the 1 April 2002,
the passenger levy, of NKr 128 was removed. It has been replaced
by a National Aviation Green Tax of NKr 108 per tonne of CO2 (or
NKr 0.28 per litre of fuel, compared to NKr 0.73 per litre for
petrol). International aviation is exempt from green taxes. (112.8
NKr = £10, appr.)
VAT ON AIR
TRAVEL
" . . . there is no VAT on any aspect of
air travel, not on airline tickets, nor on purchase of aircraft,
nor on their servicing, nor on their fuel, nor on air traffic
control, nor on baggage handling, nor on aircraft meals. Everything
to do with air travel, after passport control, is zero rated."
(The Hidden Costs of Flying, Brendon Sewill,
AEF, 2003)
This is the situation today in the UK. However,
many European countries do apply VAT to domestic air travel, as
shown in the following table:
VAT Rates on air travel as at 1 May 2002 (source:
European Commission)
| B | DK
| D | EL | E
| F | IRL | I
| L | NL | A
| PT | FIN | S
| UK |
| Domestic air transport | 6
| Ex | 16 | 8 |
7 | 5.5 | Ex | 10
| 3 | 19 | 10 |
5 | 8 | 6 | 0
|
| International air transport | 0
| 0 | 0 | 0 |
0 | 0 | 0 | 0
| 0 | 0 | 0 |
0 | 0 | 0 | 0
|
Notes: 0 = zero rated Ex = exemption
While most countries not applying a zero-rating, or exemption,
to air travel choose to apply the same rate of VAT to all forms
of passenger transport, this is not true in every case. The Netherlands
applies a rate of 19% to air travel (the same as for the private
motorist), but charges rail, road and water transport only 6%.
The German parliament has also signaled its intent to extend
VAT on air travel to international flights (for the proportion
of the flight within German airspace). A proposal is in preparation
and will soon be brought before parliament. If approved, it will
then be sent to the assembly of German states (the "Bundesrat")
for a second vote. If the Bundesrat votes against its implementation,
a "Vermittlungsausschuss" will be established to find
a solution. The minimum timeframe for this process is about three
months.
PASSENGER TICKET
TAXES
In the US, the government levies a passenger ticket tax on
domestic flights and a passenger segment fee. The passenger segment
(a segment is defined as one take-off and landing cycle) fee is
$3 per segment per passenger and raised $1.7 billion in 2000.
The passenger ticket tax is 7.5% of the ticket price (originally
10%) and raised $5.1 billion in 2000. The rate will stay at 7.5%
until at least 2007. Both the passenger ticket tax and the passenger
segment fee go into the Aviation Trust Fund, set up to implement
the Federal Aviation Administration's programmes, including environmental
measures.
May 2003
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