AEF view on Emissions Cost Assessment

12th October, 2007

A formal response to this consultation is being prepared. This page gives our initial views.

The government has issued a consultation on its ‘Emissions Cost Assessment’. The assessment compares the social cost of aviation’s climate change emissions with the taxes it pays. We are concerned that assessment and and the consultation will be used to try and justify tax exemptions for the aviation industry.

According to the DfT, the object of Emissions Cost Assessment is to “compare the social cost of aviation’s climate change emissions with the extent to which the industry covers that cost. This information will then be used to help inform strategic decisions on future aviation policy.”It is clear that the thrust of the work is to assess to what extent the ‘cost of carbon’ is reflected by the tax, ie APD, the industry pays. This is extremely dubious because ADP was not set up to reflect the cost of climate change or act as a proxy tax for it.

Aviation is hugely under-taxed compared with other sectors of the economy and APD goes only a small way to redressing that balance. For example, if aircraft were taxed at the same rate as petrol, it would be worth £9 billion pa to the Treasury. In contrast, APD brings in about £2 billion pa.

The view of AEF, other NGOs and many commentators is that aviation should pay for all the environmental damage it causes and it should also make a contribution to general government revenues.

Therefore, while the Emissions Cost Assessment’ is a relevant factor in the issue of taxes, the study cannot, by its very scope, achieve the DfT’s stated objective. An Emissions Cost Assessment can only assess the costs – it cannot of itself say anything about taxes.

In our view aviation should pay for all its environmental costs, not just climate change. This includes: noise, local air pollution, third party safety, third party heath impacts, planning blight and sterilisation of land, biodiversity loss, heritage loss and amenity loss. It should also, as noted above, make a fair contribution to general revenue.

The consultation also tries to link the european Emissions Trading Scheme (ETS) with this assessment. This is also extremely dubious because the fact that there is an emissions trading system in no way excuses the aviation industry from paying for its emissions of greenhouse gases, for paying for its other environmental impacts or for making a contribution to general revenue. The industry already sees ETS as a way of avoiding taxes and it appears that the government is trying to set up in advance this ‘justification’ for not taxing.