Report
Designing an equitable climate levy
Levies on commercial aviation fuels and/or airline tickets could help achieve the 2050 net-zero climate goal. However, because there is uneven participation in air travel by household income and country, it is important to consider the distributional effects of such a levy.
This report builds on previous ICCT research and includes a wider analysis of six levy designs and their distributional effects: an air passenger duty, an aviation fuel tax, a frequent flying levy, an air miles levy, a luxury aviation levy, and a ticket levy with rebates. The comparison provides insights into ways to design a levy according to different values and to best fit the intended use of tax revenues.
Results show that:
- An air miles levy most equitably distributes the cost burden of aviation climate taxation
- Instruments that exempt infrequent flying (a frequent flying levy, a ticket levy with rebate, and an air miles levy to an extent) would minimize the impact on once-a-year non-business trips.
- A ticket levy with rebates achieves similar distributional effects as a frequent flying levy or an air miles levy and would likely to be easier to implement.
- A frequent flying levy or an air miles levy would be most suitable for raising funds for global climate finance, as these collect revenues mostly from wealthy, frequent flyers and can level-out the demand impact on leisure versus business travel.
- Geographically concentrated coalitions with some large aviation markets could be effective in raising substantial revenue while minimizing emissions leakage if neighboring countries do not have an aviation climate levy in place.
