Aviation and the Global Atmosphere

Aviation and the Global Atmosphere
ICAO makes a distinction between charges and taxes and, because charges are based on cost of service and the revenue is retained by the aviation sector, has
expressed a strong preference for the former. It regards charges as levies to defray the costs of providing facilities and services for civil aviation and taxes as levies to
raise government revenues, which are applied to non-aviation purposes. In applying this principle to environmental levies, the ICAO Council Resolution on
Environmental Charges and Taxes recommends that, where introduced, levies should be guided by the following principles:
. There should be no fiscal aims behind the charges.
. Charges should be related to costs.
. Charges should not discriminate against air transport compared with other modes of transport.
The Resolution was adopted in December 1996, and endorsed by the 32 nd ICAO Assembly (ICAO, 1998b).
One of the recommendations at the CAEP/4 meeting in April 1998 (ICAO, 1998a) was to "identify and evaluate the potential role of market-based options, including
emissions charges, fuel taxes, carbon offset, and emissions trading regimes." This recommendation was approved by the ICAO Council, and the 32nd ICAO Assembly
subsequently requested that a conclusion be reached on guidance to be given to states on emissions-related levies in time for the next ICAO Assembly in 2001 (ICAO,
1998b). In its future work, CAEP will identify a range of market-based options, assess their limitations, identify their environmental effects, consider the application of
revenues that might be accrued, and consider implementation mechanisms that might be employed.
ICAO does not, however, cover member states' tax policies for domestic aviation. The United States, for example, applies a fuel tax on domestic air carriers and
general aviation aircraft; the receipts are held in the Airport and Airways Trust Fund and are prohibited by law from being used for non-aviation purposes. Similarly,
some domestic aviation fuel is already taxed in Europe, where the status of the mandatory exemption of international aviation fuel from taxation has been under
discussion for some time. In March 1997, the European Commission proposed in a draft directive that this aviation fuel tax exemption should remain until the
international legal situation permits imposition of such a tax (European Commission, 1997).
Zurich Airport has added an emissions surcharge to the landing fee based on engine certification information contained in the ICAO Engine Exhaust Emissions Data
Bank (ICAO, 1995b; Zurich Airport Authority, 1997). This charge was intended primarily to provide an incentive to encourage operators to use their lowest emissions
aircraft into Zurich and to accelerate the use of best available technology. Revenues are used to finance emissions reduction measures at the airport. A similar
emissions-related charge was applied at 10 Swedish airports beginning 1 January 1998. These charges are revenue neutral and do not affect consumer demand. They
do, however, provide an incentive to airlines to purchase and operate aircraft with lower engine emissions. These charges are considered consistent with ICAO
principles.
Concern has been expressed that uncoordinated introduction of emissions charges at the national, sub-federal, or regional level or by airports will have international
repercussions because they are discriminatory to some aircraft that comply with internationally recognized standards, and the original intention of the NO x certification
standards was not to set local environmental restrictions, including levies. One implementation issue that would need to be addressed with fuel taxation is that
international taxation of aviation fuel is currently precluded by provisions contained in many bilateral air service agreements between countries, the main legal
framework underlying the operation of international civil aviation. Three studies assessing the economic and environmental impact of environmental levies are
considered below. A 1997 OECD study (OECD, 1997a) found that although fuel price increases have had little impact on the demand for air travel, the rate of energy
intensity reduction in civil aviation has been very responsive to fuel price. On the basis of historical data, the study concluded that, when implemented on an
international basis, a meaningful rise in fuel prices introduced at a moderate rate each year could have a large impact on increasing the rate of energy intensity
reduction. The study considered fuel charge options equivalent to 2, 10, and 50% of the price of aviation fuel, and considered the use of revenues to reduce the
general level of taxation and to fund research and development within the aviation industry.
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