Airlines, efficiency, taxes and subsidies
09/07/07 16:18
Q: What
is the difference between reducing energy consumption
in cars or lightbulbs vs. airliners?
A: When people buy efficient cars and lightbulbs they don't typically drive more or leave the lights on longer so energy consumption goes down. Whereas more efficient airliners drive down the cost of flying and people fly more.
The "demand elasticity" for air travel means more efficient planes may not save energy whereas more efficient lighting and cars do. Partly that is because air travel is government subsidized by other forms of transportation so prices are artficially low.
Free Rider?
Unlike vehicles, trains, boats and other fuel users, airlines pay no or almost no fuel taxes worldwide. In the U.S., airlines pay 8% of what other transportation methods use. In many countries, airlines also do not pay VAT or sales taxes.
This means other transportation methods subsidize airlines that are not burdened by taxes.
The zero tax on international airlines stems from the founding of ICAO, the International Civil Aviation Organization, a part of the U.N. in 1947 in order to foster the development or airlines (OK this is done) and ensure common standards and a level playing field between countries. The ICAO policy migrated its way into most country's domestic airline tax policy as well as some aircraft fly both domestic and international routes.
What To Do?
The International Air Transport Association (IATA) lobbies hard to prevent aviation fuel taxes, however a few countries such as Norway and the Netherlands have begun to tax domestic airline emissions and fuel.
As part of the United Nations, we think ICAO has a responsibility to endorse airline fuel be taxed at the same rate as road transportation for domestic and bilateral international routes.
A: When people buy efficient cars and lightbulbs they don't typically drive more or leave the lights on longer so energy consumption goes down. Whereas more efficient airliners drive down the cost of flying and people fly more.
The "demand elasticity" for air travel means more efficient planes may not save energy whereas more efficient lighting and cars do. Partly that is because air travel is government subsidized by other forms of transportation so prices are artficially low.
Free Rider?
Unlike vehicles, trains, boats and other fuel users, airlines pay no or almost no fuel taxes worldwide. In the U.S., airlines pay 8% of what other transportation methods use. In many countries, airlines also do not pay VAT or sales taxes.
This means other transportation methods subsidize airlines that are not burdened by taxes.
The zero tax on international airlines stems from the founding of ICAO, the International Civil Aviation Organization, a part of the U.N. in 1947 in order to foster the development or airlines (OK this is done) and ensure common standards and a level playing field between countries. The ICAO policy migrated its way into most country's domestic airline tax policy as well as some aircraft fly both domestic and international routes.
What To Do?
The International Air Transport Association (IATA) lobbies hard to prevent aviation fuel taxes, however a few countries such as Norway and the Netherlands have begun to tax domestic airline emissions and fuel.
As part of the United Nations, we think ICAO has a responsibility to endorse airline fuel be taxed at the same rate as road transportation for domestic and bilateral international routes.
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