Your tourists or your life

Frank writes*

A flight from Eindhoven to Berlin: 50 euros.
The extra revenue for Berlin’s economy: 300 euros.
Climate change caused by the plane’s emissions [pdf]: 5 euros.
That picture of you, with the Brandenburger Tor: priceless.

Or is it?

Direct emissions from aviation are responsible for roughly 3% of the total carbon dioxide emissions in the European Union. Compared to other forms of public transport [pdf], air travel is one of the most carbon intensive methods of movement. Meanwhile, according to the International Civil Aviation Organization, the number of flights and the total emissions by the industry are only projected to grow in the near future.

Photo by dsleeter_2000 via climatevisuals.org

In the light of climate change, this has led some to oppose flying, such as flight shaming. According to a survey by the European Investment Bank, a majority of EU citizens favor a ban on short-distance flights. Dutch politicians prefer a European tax on flying, which will result in higher prices that will reduce demand for flights.

European tax legislation is notoriously hard to pass, requiring unanimous approval by all 28 members. Therefore, the Netherlands are planning to introduce a national flight tax. However, a national flight tax introduces its own unique downsides, with the main concerns regarding capital flight (pun intended) from the aviation and tourism industries.

Academics like William Nordhaus, recipient of the 2018 Nobel Memorial Prize in Economic Sciences, argue that we must not “[burn] down the village to save it”. They assert that while the impacts from climate change may be grave, we should also consider the impacts of those measures which we take against it, which can impact the same groups as climate change. According to research by TU Delft, CO2 reductions may not be as large as some proponents boast, but economic damage might also be smaller than opponents fear.

Bottom line: We should not blindly pick one option, but rationally weigh the range of alternatives which we can choose from. This brings about a whole other range of concerns regarding sensitivity to assumptions and decisions on parameters like discount rates, but these fall outside the scope of this blogpost. We may choose to face the full cost of flying to Berlin, and potentially stay home instead, or we may choose a selfie with the Brandenburger Tor. But choose, we must.


* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

One thought on “Your tourists or your life”

  1. Hi Frank! Great post. I think your topic is interesting because it specifically focuses on the costs and benefits of a national flight tax (correct me if I am wrong).

    I’d like to make two suggestions/remarks:

    1. I read in an article on Forbes that a spokesperson for Lufthansa had said this about a national tax: “Tax increases undermine future investments in air traffic: money spent on taxes is money airlines cannot invest in modern, low-emission aircraft.” Read the article here: https://www.forbes.com/sites/emanuelabarbiroglio/2020/04/18/the-netherlands-keeps-going-upstream-when-it-comes-to-aviation-tax/#5d8de9986e86
    Are you making any assumptions for your CBA about the utilization of tax revenues from flying taxes? I think it is worthwhile to think about the life cycle, if you will, of the tax. Who is paying them? Who is receiving the money?

    2. If your assumption is less about this and more about this statement in your blog post: “[…] will result in higher prices that will reduce demand for flights,” then I wonder if you have given some consideration to the elasticity issue. Trips to Berlin for selfies with the Brandenburger Tor seem more elastic than the diaspora going to their country of origin once a year to see family. What’s making up most of the demand? Which one is emitting more? Elasticity also leads to the issue of bumping up the carbon tax over time. Are you going to consider different scenarios in time with taxes gradually increasing? Read something about this here: https://www.wired.co.uk/article/plane-tax-eco-france-sweden

    Best of luck to you for your analysis!

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