2020/11 – EcoTax

The regional airports served 140 million passengers in 2019.  A $10 per-passenger eco-tax would have generated $1.4 billion for mass transit.

Europe

A 2019 ICF study1 detailed Europe’s efforts to a) manage the near-term effects of “flight shame”2 and b) reconcile the industry’s long-term growth with the goal of carbon-neutrality.3

The Netherlands, at the behest of the air travel industry, proposed to tax passengers €7.  France called for an éco-contribution of €1.5 for economy class within the EU and up to €18 for business class outside the EU.  The eco tax was projected to raise €160 million ($200 million) per year.4 

EU taxes on air travel broadly comprise 3% to 14% of total airfares.  Proceeds mostly go to central governments—except for France, which ring-fences them to alternative transport.

Image ICF.

New York-New Jersey

JFK, Newark and LaGuardia airports together served 140 million passengers in 2019.5  A $10 per-passenger tax would have generated $1.4 billion for reinvestment in sustainable projects.

New York and New Jersey are highly motivated to support the proposal.  Each state operates mass-transit systems with revenue shortfalls as a result of the pandemic.  And each has committed to aggressively reduce CO2 emissions from the transportation sector.

The Port Authority

The Port Authority of NY-NJ is the logical candidate to administer the program.  It operates the region’s airports and can certify that the funds will be directed towards suitable transport projects.6  

The PA is nominally constrained by the Federal Aviation Administration (“FAA”) on how much it can levy in passenger facility charges (“PFCs”) and for what purpose.7 8  But the rationale of an eco-tax is not to fund airport infrastructure to encourage more flying.  It is to mitigate flying’s impact on the environment.  

Simply, an eco tax should be doable if the PA and the carriers are willing.

The Carriers

Awareness of aviation’s role in climate change is growing.  The World Travel and Tourism Council characterized it as an existential threat to the industry.9  CitiBank projects that the cost to offset U.S. air travel could rise to $3.8 billion per year by 2025 for economy seats alone.10  

The carriers are motivated to drop their traditional opposition to airport fees.11 , It must show that sufficient profits are set aside to offset significantly more emissions than it generates.  Otherwise, it faces a generational boycott and the degree of opprobrium now accorded to tobacco companies, opioid vendors and the oil industry.12

Some carriers have already taken action.  In early 2020, before COVID-19 roiled the industry, Delta and JetBlue each announced programs to carbon offset all passenger air travel.13 14 

Restrictions comparable to PFCs apply to air freight.  But that industry should be held to account for emissions generated by older, less efficient fleets, retired from passenger service.16 17  

Conclusion

Ideally, national legislation is needed.  Climate change cannot be addressed by individuals or even states alone.  But there is nothing to stop progressive states and transport agencies from leading the way. And now—as air travel slowly recovers from the pandemic and the public increasingly realizes comes to grips with the realty of global warming—is the time to act.

Neile Weissman, 2020

Notes

1 “Aviation taxes and their role in managing aviation’s carbon footprint”, ICF, 2019, https://tinyurl.com/yx26a7k8

2 “Flight-Shaming” Taxes: Climate Policy or Opportunism?”, Forbes, 10/29/19, https://tinyurl.com/sh2vg5j

3 “There’s no way to ‘put a passenger jet on a long-distance flight without burning through 100 tonnes of fossil fuels.’ says Mike Berners-Lee, a carbon footprint specialist and professor at Lancaster University., Flight shame: Airlines are under rising pressure to cut their carbon emissions.”, Los Angeles Times, 8/28/19, https://tinyurl.com/y2rjej7t

4 “Economy class flights within the EU will be taxed €1.50. Business class flights out of the EU will have the highest tariff of up to €18. The tax is expected to raise $200 million per year after 2020., France plans ‘eco-tax’ for air fares.”, BBC, 7/9/19, https://tinyurl.com/sesh3xs

5 Air Travel Report 2018, Port Authority of NY&NJ, p. 1, https://tinyurl.com/y6ql5hag

6 “Restructure the Port Authority to function as a regional infrastructure bank,” Regional Plan Association, 2018, https://tinyurl.com/y6ake36l

7 “Passenger Facility Charge (PFC) Program – Airports”, Federal Aviation Administration, https://tinyurl.com/skym9v7

8 “The FAA said there was no way to figure out how the Port Authority comes up with the fees it charges. Willis found “no established, consistent, clear and fully justified method of establishing the rate base on a predictable schedule.” United said the PA’s current rate formula results in fees that are 38 percent above actual costs. FAA Blasts Newark Airport for How It Charges Airline Fees”, Bloomberg, 2018, https://tinyurl.com/tsqwr9v

9 “Changing climate could destroy industry, travel CEOs warned”, Travel Weekly, 9/26/19, https://tinyurl.com/wtngopy

10 “‘Flight Shame’ Predicted to Make Carbon Offsetting Big Business”, Bloomberg Environment, 10/23/19, https://tinyurl.com/w9kn2yv

111 “Five Reasons Airports Don’t Need A PFC Increase.”, Airlines for America, https://tinyurl.com/rzaelry

12 “I’d assumed that electricity and driving were my largest sources of emissions. Instead, it turned out that the 50,000 miles I’d flown that year utterly dominated my emissions., How Far Can We Get Without Flying?”, YES! Magazine, Spring, 2016, https://tinyurl.com/s3627lj

13 “Delta Air Lines CEO announces the carrier will go ‘fully carbon neutral’ next month,” CNBC, 2/14/20, https://tinyurl.com/yx4odvy4

14 “JetBlue plans to go completely carbon neutral on all U.S. flights,” Washington Post, 1/8/20, https://tinyurl.com/u8arynb

15 Federal Excise Taxes on Air Freight (A Twisted Logic Game), Wiley Rein, 2011, https://tinyurl.com/wwbwbwx

16 “Now entering their golden years, many of the remaining 640-or-so 757-200s are finding new homes as freighter aircraft., Amazon And Alibaba Save The Boeing 757”, Forbes, 4/2/19, https://tinyurl.com/up7xoq6

17 Certainly, FEDEX has become the new poster child for non-payment of taxes. “How FedEx Cut Its Tax Bill to $0”, NY Times, 11/17/2019, https://tinyurl.com/v2gm2dw