Leo Murray, Possible: Reducing emissions from air travel

Sarah: I'm going to introduce our next speaker, who is Leo Murray from the organisation Possible.

Leo Murray: Thanks. Hi, everyone. So my name is Leo Murray. I am a director at the climate change charity Possible. And I'm going to try to talk you through some of the options for reducing the expected growth in demand for air travel. So the basic problem is simple, and that is that on current trends, we're expecting a lot more flying in the future than we can fit inside this net-zero target. Now that is, even with a lot of assumptions about the technology improvements that we've heard a bit about. Even if technology does improve and we quite optimistic about these assumptions, were still looking at a lot of much more growth in air travel than is permissible if we're trying to meet this net-zero target. So the government is forecasting about 50% growth. But the Committee on Climate Change is saying that yes, air travel can grow, but not by more than 25%. So we're looking at twice as much growth in air travel as we can fit inside this budget, even with a lot of the technology improvements.

Now, this is not an easy thing to do to manage demand down to within that safe limit and there to kind of areas of key challenge, if you're trying to do this as a policymaker. The first is around cost and that is fundamentally there are a lot of quite generous tax breaks that have kept the cost of air travel artificially low relative to other forms of transport. And of course, people have become accustomed to cheap flights and it's, you know, it's difficult if you're a politician to roll that back, but we know that almost, whatever happens, trouble's gonna have to become more expensive in some way. That's the first challenge.

And then the second area of challenge is the international nature of air travel. It just does make it difficult for a national government to implement effective policy on this. And the second half of that problem is that, you know, in an ideal world, would be solving this at a global level. But the United Nations has a global regulator on it on air travel, and they are not doing their job properly. So I'll talk a bit more about that in a bit.

So taxing air travel. At the moment, international jet fuel is completely untaxed, so it's totally free from tax. And it's been that way since the 1940s. There's a set of international agreements called the Chicago Convention and most governments see the Chicago Convention as a legal block on them taxing jet fuel. But for comparison, and this is important, if we were in the UK to tax jet fuel at the same rate that you and I pay for petrol out of pump when we go to refill car petrol station, I would add about £43 to the cost of a return flight to Barcelona or £200 in New York and back. So you're talking about very big difference there. Now we also - plane tickets are 0% rated for VAT. Now that is alongside of other items like wheelchairs and baby clothes, 0% rating for the VAT, so is air travel. For comparison, you know, there are items that have a reduced rate of VAT, like tampons, where you pay 5%. Or solar panels or bicycles pay the full 20%, so it gets a very generous tax treatment.

Now what we do do in the UK is we charge something called Air Passenger Duty. We charge that on most flights that are departing from UK airports and nearly all passengers pay the reduced rate of £13 for short-haul, for a short trip within Europe or £78 for a long haul flight. Now, APD, Air Passenger Duty raised just over 3.5 billion for the Treasury last counts. But it would need to be three times this high to make up for the fuel duty exemptions and the 0% rating for the VAT. So effectively, if we were taxing air travel in the same way that we tax other goods and services, we would be taxing -we would taken about £7.5 billion more from air passengers each year.

And now we have to have a slight diversion here for a moment to talk about carbon offsetting. I don't think it has come up yet in this process, but it's very important in the conversation around air travel. So this is the practise of increasing emissions in one place from one source, but paying for them to be reduced by the same amount somewhere else from another source. So in theory that neutralises the emissions that you've created, that's the theory behind carbon offsetting. The aviation industry and lots of industries prefer offsetting as an alternative to reducing emissions from air travel. So it's important to understand offsetting does not reduce emissions from air travel. It's an alternative to doing that. Instead of reducing emissions, you pay somebody else to do it. The big problem with it is that the evidence that it actually works is very, very poor. There's not time in this presentation to go into the details of that, happy to fill questions on it. There is a big carbon offsetting plan. So when I said the UN global regulator is not doing their job properly, I meant they're not really regulating to reduce emissions from air travel, they are planning to introduce an enormous offsetting scheme that will add a few pence to the price of a plane ticket in 2030. It's not really touching the sides of this.

Now carbon pricing is something different from offsetting, and that is where businesses pay for permits to emit carbon, but the price sets of the upper limit of those emissions is capped. And we do have something in Europe at the moment of entry, EU flights is called the EU Emissions Trading Scheme that adds a pound or two to tickets at the moment If and when the offsetting scheme is introduced, the aviation industry wants that scheme scrapped and replaced by the offsetting one. It's important to understand that that prediction the government has 50% growth in air travel, it factors in a carbon pricing, it factors in a carbon price of over £200 per tonne in 2050 and that has an effect on demand. But it's important to understand that right- that there's not an actual policy and there are no policy plans in place to introduce that level of carbon price. If we don't get it, then air travel will grow more than 50%.

So what are our options here? The simplest option would be to use Air passenger Duty. Because it is the only existing tax that we levy on air travel today. We could simply turn that up, and we can do that quite easily and immediately. A downside of that is that Air Passenger Duty is quite a blunt instrument. It doesn't match the emissions from the flight very well, but also because it's levied on passengers, not planes, it doesn't incentivise airlines to fly more efficiently. It doesn't incentivise them to fly full planes. If you think of things like ghost flights, British Airways used to fly empty planes between Heathrow and Cardiff to hold up two runways lots. And of course, they weren't paying any tax on that because there were no passengers on board.

Now another approach that we could take, which Sally touched on, is managing the demand through airport capacity constraints. So we have enough runways and terminals, existing UK airports to handle all of the growth in air travel. The Committee on Climate Change says we can fit inside this budget. So simple thing to do. Don't expand our airports. Now the downsides of this is that Heathrow, of course, plans to get a third runway and if we build that third runway, then we would need to constrain airport capacity elsewhere by about 10% and that, that's like that would be the equivalent of closing Manchester Airport. And It's not just Heathrow there were 21 airports across the UK that are all planning to expand and together that would add considerably more than 50% capacity to the runways and terminals that we have.

This is mine, and my organisation Possible's preferred option, would be to manage that demand growth with a frequent flyer levy, instead. As we heard from Sally, 15% of people are taking 70% of all the flights. The problem is not really annual family holidays and so on. So this would replace Air Passenger Duty, where you would have lower zero tax for one flight per person each year, and then it would just keep going up for each extra flight that you take after that point. That shifts the rising tax burden onto those who fly the most. Now we know that some flights in the future have to be stopped. So whose flights are we going to stop? Now if we rely on just increasing Air Passenger Duty or carbon pricing or airport capacity constraints, what happens is most of the reduction in new flights comes from people on below-average incomes who rarely fly currently. If you use a frequent flyer levy instead, it would be most of the reduction in new flights comes from those on above-average incomes who currently fly a great deal. So that's why I prefer it. I think it's fairer. It's a fair way of doing it.

So just to conclude it's really clear, UK airport expansion, any of our airports, it's not consistent with meeting this goal. We know that price increases are needed, but most options for doing that would hit lower-income flyers the hardest. Frequent flyer levy could be a very effective way to manage that growth in demand for flights within the safe limits but still protecting access to some air travel for all income groups. So annual family holidays, seeing your mom in another country, everyone would still be able to do that in this carbon-constrained future. The last point is that legislating for a frequent flyer levy might be very difficult to do because nearly all politicians and people who hold power, decision-makers, think newspaper editors, business magnates, they're all frequent flyers themselves. And so, you know, we quite like to get push back on this as a solution. Thanks so much.

Sarah: So hank you very much Leo.