If you’ve been involved in climate activism for a while, you’ve probably seen discussions around the implementation of a carbon tax. It’s an idea that can take different forms but has proven to be popular among many people on both sides of the political spectrum.
In January, 43 of the world’s most eminent economists signed a statement published in the Wall Street Journal calling for a US carbon tax. The list included 27 Nobel laureates, four former chairs of the Federal Reserve, and nearly every former chair of the Council of Economic Advisers since the 1970s, both Republican and Democratic.
If we’re imagining a new kind of future that we’re going to build in the wake of COVID-19, that has to include decarbonisation most urgently. If we’re going to kickstart our economy, we also have to acknowledge that the ultra-wealthy need to pay their fair share. Financially, socially, and in terms of climate impact. Just recently, for example, a group of ten tried to ignore lockdown rules and charter a private jet to France for a holiday, which the French authorities immediately put a stop to. It’s hard to even conceive of a mindset that thought any of that decision was a good idea, but it does bring to light something I’ve thought about for a while
It’s time to tax private jets.
The most important requirement of any measure is that there must be a cost to emitting carbon, some reasonably high price of carbon. This, in turn, is most easily achieved by carbon taxes…
This is a difficult issue, one of the difficult issues of this century. It really is of enormous importance that we get something that works and set a high price for carbon soon. It’s a second-order issue, which method you use; I would go for any that works. A carbon tax is most efficient, but that doesn’t matter that much.
The need to rebuild economies all over the world gives us a chance to build a different kind of economy. To create a different system that cares for all of us. So let’s talk about why a carbon tax is part of that, and why I think there should be special considerations for private jet usage.
What is a carbon tax?
The idea behind carbon taxation was pioneered by Yale’s William D. Nordhaus, who received the Nobel Prize in Economic Sciences in 2018. Nordhaus created a model to estimate the social cost of carbon and put forth the idea that polluters should bear the costs of their activities, rather than passing it on to future generations. This extra cost, once determined, could potentially be added to oil at the point of purchase, coal at the point of mining, or natural gas when it’s fed into a pipeline.
The concept is simple: a tax is needed to include the costs of carbon that the current market price of fossil fuels doesn’t account for. Right now, users of fossil fuels have only paid a price that accounts for the cost of fossil fuel extraction and other expenses of the company selling it. We don’t pay for the ‘external’ costs that will come later. A carbon tax takes into account the future environmental and health damages using this carbon will also create, and changes the price of goods accordingly.
The overall argument is that increased costs both account for the costs of pollution that we don’t consider, while also incentivising businesses, governments and households to reduce carbon-intensive consumption to avoid paying more. Eventually, the hope is it will lead to a dramatic decrease in carbon, helping us to decarbonise our world as fast as possible.
According to the World Bank, 26 countries have implemented some form of carbon tax. One example of a functioning carbon tax is Costa Rica. Implemented in 1997, the tax generates $26.5 million in revenue every year which is then redistributed to farmers and landowners working on rainforest protection or reforestation. They also specifically prioritise lower-income regions when distributing payments. Climate Change News predicts that if all 12 countries with tropical rainforests in Africa, Asia and South America implemented similar policies, they could collectively generate $1.8 billion annually while also fighting deforestation, lowering emissions and supporting rural communities.
The most important thing about applying these taxes is that it needs to be done right. A carbon tax is inherently a tax on consumption, so it must be applied in a way that doesn’t unevenly hurt the poorest or most marginalised in society.
49 percent of respondents said they would support a carbon tax if the revenues were rebated to households, and 67 percent said they would support a carbon tax if revenues were put toward environmental restoration.
A carbon tax isn’t perfect. There is still uncertainty over the exact cost of carbon, while there is also concern that using too high an estimate will cause more problems than benefits. Unless designed and integrated properly, a carbon tax could hit poorer households the most, as they spend a larger portion of their overall income on things like fuel and electricity.
This is why, in my opinion, specifically tackling private jet seems like a no brainer.
The private jet problem
Overall, it is said that emissions from aviation make up between 2 – 3% of total global emissions. While a small number, addressing this sector is key because it’s also an area that is rife with deep inequality in terms of the consumer.
Recent research found that just 1% Of English residents are responsible for nearly one-fifth of overseas flights, while another 48% of the population took no flights at all. There is currently no tax on jet fuel, and plane tickets are zero-rated for VAT. The annual value of this tax subsidy is estimated at £11.4bn, which would approximately be enough to reverse the cuts to legal aid, disability benefits and buses, scrap tuition fees, employ 5,000 more nurses and build ten new hospitals every year in the UK.
Phasing out fossil fuels can be a complex, but changing how we approach aviation is low hanging fruit, as there are already models in place that allow us to do this without hurting the average holiday-maker or those on a low income.
This can be done through the introduction of a frequent flyer levy, under which everyone would be allowed on tax-free flight per year, before paying progressively higher taxes on each additional flight taken. Families and ordinary people can still take their annual holiday tax-free, but this would also incentivise people to stop taking unnecessary flights (it should not be cheaper to fly London to Amsterdam instead of taking the Eurostar), especially because those who indulge in multiple flights each year are wealthy, all the while passing on the social cost to the poorer in society.
It makes sense, therefore, to extend this principle to the use of private jets too. According to MarketWatch the average private jet owner has a net worth of $1.5 billion. The global super-rich are said to account for 15 – 25% of the global private jet market and 25% are bought by companies that organise group ownership of planes, with the rest being bought by multinational companies. In Europe, businesses and people often avoid paying VAT on imported private jets by routing purchases through the Isle of Man. According to The Economist, this has allowed them to avoid paying £790m for imports of at least 200 aircraft into the EU since 2011. In the US, individuals and companies are currently able to write off the full cost of a private jet against their federal taxes.
Private aviation is a luxury, not a right, and those who choose to use it should be held accountable for their choices.
Bill Gates, the Microsoft founder and world’s second-richest man, took 59 flights in 2017 travelling more than 200,000 miles, according to the study by academics at Lund University. The report estimated that Gates’ private jet travel, which he has described as his “guilty pleasure”, emitted about 1,600 tonnes of carbon dioxide. That compares to a global average of less than five tonnes per person.
The environmental cost of private jets isn’t a fun read. Some estimate they emit up to 20 times more CO2 per passenger mile than a commercial airliner, others suggest this figure is closer to 40 times as much carbon. While commercial aircraft consistently get bigger (meaning they can carry more passengers at once) and more fuel-efficient, private jets can’t match them because they carry such small numbers. Plus, emissions from private aviation are higher because they fly empty 40% of the time. While commercial airlines plan their routes for efficiency, private jets are often used for one-way flights and as they fly elsewhere to pick up other passengers. While aviation is a small portion of global emissions, it’s a huge factor in regards to personal carbon footprints.
While private jet emissions are a tiny fraction of total emissions, recent analysis from Lund University shows the people who make these flights have personal carbon footprints that are hundreds or even thousands of times the average as a consequence.
The use of private jets also starkly shows larger structural inequalities.
In traffic-snarled megacities in the US, Asia and South America, time-pressed businesspeople and the super-rich are increasingly relying on personal aircraft to get around…
In a 2018 survey by US-based Business Jet Traveler magazine of more than 1,400 executives and high-net-worth individuals, comfort, privacy and security were key factors in their decision to fly in private aircraft. But most chose the option in order to save time and enjoy the convenience of smaller airports. In fact, 77% of respondents said their typical flight was less than 1,500 miles (2,400 kilometers), with only 7% saying they used private jets for intercontinental flights.
What can be done?
Organisations such as Jacobin Magazine in the USA and Common Wealth/A Free Ride in the UK have called for a ban on fossil-fuel-based private jets altogether, believing this would force the people who rely on them to invest in alternatives like electric aircraft. Considering that biofuel is not readily available and two and four-seater electric aircraft are already in use, it seems likely that this is what would happen. A ban is something I would absolutely welcome, but I am doubtful over whether this could be enacted immediately when so many aircraft are owned by large corporations with lobbying power.
I think the first achievable, more immediate step, may be the implementation of taxation of fossil fuel-powered private jets.
It has been reported that private jet customers have already been asking about offsetting, but this is not the same as actually dealing with the problem. A tax on using private jet fuel, taking into account the social cost of using hugely inefficient aircraft carrying small numbers, while also building on the concept of taxing flyers based on frequency, can do a lot to reduce demand for private flight and to correctly charge those who are most responsible for the climate crisis to begin with, all the while rerouting funds into policies that reduce inequality and protect our future such as reforestation and rewilding, accessible public transport, universal basic income, and green technology and jobs.
As we come out of this pandemic, the way we think about economics has to change. Including proper taxation on flights and private jets is an incredibly easy way to start, giving us more time and resources to address the most complex issues. Places such as Costa Rica are already on their way, it’s time we catch up.