IDEAS home Printed from https://ideas.repec.org/b/wfo/wstudy/58888.html
   My bibliography  Save this book

Sustainability-oriented EU Taxes:The Example of a European Carbon-based Flight Ticket Tax

Author

Listed:
  • Margit Schratzenstaller
  • Alexander Krenek

    (Austrian Institute of Economic Research)

Abstract

Taxing the aviation sector at the EU level and using the resulting revenues to reduce member countries' contributions to finance the EU budget presents itself as a huge opportunity not only to decrease carbon emissions effectively, but also to reform the EU system of own resources. The aviation sector is a small but fast growing emitter of carbon dioxide. The failed attempts of several EU countries to introduce a flight ticket tax and the pressure on those EU countries still levying such a tax clearly demonstrate the limits of national aviation taxation. Assigning any kind of taxes on flight tickets to the EU level would greatly reduce the tax enforcement problems inherent to mobile tax bases and put a stop to harmful tax competition between EU countries. A double dividend, consisting of a reduction of CO2 emissions on the one side and a boost for the economy on the other side, is a likely scenario if additional tax revenues are spent in the right way. Therefore, in this paper it is proposed that all revenues from a European carbon-based ticket tax should be used to reduce contributions of member countries to the EU budget. This would allow national governments to reduce taxes more harmful for growth and employment, in particular the high tax burden on labour. Given the current political and legal situation a European carbon-based ticket tax has better chances of implementation compared to a tax on aviation fuel and is therefore a financial instrument which could foster sustainable growth in the very near future. The paper estimates the expected revenue from implementing a carbon-based flight ticket tax at the EU level and revenue distribution across EU countries. In particular, we propose that every passenger departing from an airport within the EU and every passenger arriving from outside the EU at an EU-based airport is subjected to this new carbon tax which is calculated individually for every route flown. The paper uses a new and very exact data set, which (depending on the country) assigns to approximately 75 to 90 percent of the respective intra and extra EU routes flown in the year 2014 the corresponding carbon dioxide emissions per passenger (using the ICAO methodology). Based on the demand elasticities provided by IATA (2007), we are thus able to exactly calculate the tax revenues per passenger per route that could have been generated in 2014 by introducing a carbon-based flight ticket tax in the EU.

Suggested Citation

  • Margit Schratzenstaller & Alexander Krenek, 2016. "Sustainability-oriented EU Taxes:The Example of a European Carbon-based Flight Ticket Tax," WIFO Studies, WIFO, number 58888.
  • Handle: RePEc:wfo:wstudy:58888
    as

    Download full text from publisher

    File URL: https://www.wifo.ac.at/wwa/pubid/58888
    File Function: Abstract
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
    2. McManners, Peter John, 2016. "Developing policy integrating sustainability: A case study into aviation," Environmental Science & Policy, Elsevier, vol. 57(C), pages 86-92.
    3. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    4. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    5. Katri Kosonen & Gaëtan Nicodème, 2009. "The role of fiscal instruments in environmental policy," Working Papers CEB 09-026.RS, ULB -- Universite Libre de Bruxelles.
    6. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    7. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    8. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2018. "Adaptation, mitigation and risk-taking in climate policy," Journal of Economics, Springer, vol. 124(3), pages 269-287, July.
    9. Nordhaus, William, 1982. "How Fast Should We Graze the Global Commons?," American Economic Review, American Economic Association, vol. 72(2), pages 242-246, May.
    10. Richard S.J. Tol, 2006. "The Impact Of A Carbon Tax On International Tourism," Working Papers FNU-120, Research unit Sustainability and Global Change, Hamburg University, revised Nov 2006.
    11. Kaul, Inge & Conceicao, Pedro, 2006. "The New Public Finance: Responding to Global Challenges," OUP Catalogue, Oxford University Press, number 9780195179972.
    12. Katri Kosonen, 2012. "Regressivity of environmental taxation: myth or reality?," Taxation Papers 32, Directorate General Taxation and Customs Union, European Commission.
    13. Margit Schratzenstaller & Alexander Krenek & Danuše Nerudová & Marian Dobranschi, 2016. "EU Taxes as Genuine Own Resource to Finance the EU Budget – Pros, Cons and Sustainability-oriented Criteria to Evaluate Potential Tax Candidates," WIFO Studies, WIFO, number 58887.
    14. Anna Dimitrova & Katarina Hollan & Daphne Channa Laster & Andreas Reinstaller & Margit Schratzenstaller & Ewald Walterskirchen & Teresa Weiss, 2013. "Literature Review on Fundamental Concepts and Definitions, Objectives and Policy Goals as well as Instruments Relevant for Socio-ecological Transition. WWWforEurope Working Paper No. 40," WIFO Studies, WIFO, number 47015.
    15. William D. Nordhaus, 2011. "Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model," NBER Working Papers 17540, National Bureau of Economic Research, Inc.
    16. Philippe Cattoir, 2004. "Tax-based EU own resources: an assessment," Taxation Papers 1, Directorate General Taxation and Customs Union, European Commission, revised Apr 2004.
    17. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
    18. repec:oup:ecpoli:v:28:y:2013:i:76:p:701-749 is not listed on IDEAS
    19. Gaëlle Garnier & Endre György & Kees Heineken & Milena Mathé & Laura Puglisi & Savino Ruà & Agnieszka Skonieczna & Astrid Van Mierlo, 2014. "A wind of change? Reforms of Tax Systems since the launch of Europe 2020," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 75-111.
    20. Hoel, Michael, 1992. "Carbon taxes : An international tax or harmonized domestic taxes?," European Economic Review, Elsevier, vol. 36(2-3), pages 400-406, April.
    21. Margit Schratzenstaller, 2013. "The EU own resources system — Reform needs and options," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 48(5), pages 303-313, September.
    22. Mai Farid & Michael Keen & Michael G. Papaioannou & Ian W.H. Parry & Catherine A Pattillo & Anna Ter-Martirosyan, 2016. "After Paris; Fiscal, Macroeconomic and Financial Implications of Global Climate Change," IMF Staff Discussion Notes 16/01, International Monetary Fund.
    23. Don Fullerton & Gilbert E. Metcalf, 1997. "Environmental Taxes and the Double Dividends Hypothesis: Did You Really Expect Something for Nothing?," Discussion Papers Series, Department of Economics, Tufts University 9706, Department of Economics, Tufts University.
    24. Dietsch, Peter, 2015. "Catching Capital: The Ethics of Tax Competition," OUP Catalogue, Oxford University Press, number 9780190251512.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rosa Maria Arnaldo Valdés & Victor Fernando Gomez Comendador & Luis Manuel Braga Campos, 2021. "How Much Can Carbon Taxes Contribute to Aviation Decarbonization by 2050," Sustainability, MDPI, Open Access Journal, vol. 13(3), pages 1-13, January.
    2. Veronika Solilová & Danuše Nerudová, 2018. "Výnosový potenciál společného konsolidovaného korporátního základu daně v Evropské unii [Revenue Potential of the CCCTB in the European Union]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(1), pages 78-98.
    3. Margit Schratzenstaller, 2017. "The Next Multiannual Financial Framework (MFF), its Structure and the Own Resources," WIFO Studies, WIFO, number 60722.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    2. Freire-González, Jaume, 2018. "Environmental taxation and the double dividend hypothesis in CGE modelling literature: A critical review," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 194-223.
    3. Tol, Richard S.J., 2019. "A social cost of carbon for (almost) every country," Energy Economics, Elsevier, vol. 83(C), pages 555-566.
    4. Alexander Krenek & Margit Schratzenstaller, 2017. "Sustainability-oriented tax-based own resources for the European Union: a European carbon-based flight ticket tax," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(4), pages 665-686, November.
    5. Gilbert E. Metcalf, 1998. "A Distributional Analysis of an Environmental Tax Shift," Discussion Papers Series, Department of Economics, Tufts University 9801, Department of Economics, Tufts University.
    6. Spengel, Christoph & Heckemeyer, Jost Henrich & Bräutigam, Rainer & Nicolay, Katharina & Klar, Oliver & Stutzenberger, Kathrin, 2016. "The effects of tax reforms to address the debt-equity bias on the cost of capital and on effective tax rates," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, volume 65, number 148156.
    7. Coxhead, Ian, 2000. "Tax Reform and the Environment in Developing Economies: Is a Double Dividend Possible," Staff Paper Series 431, University of Wisconsin, Agricultural and Applied Economics.
    8. Alexander Krenek & Mark Sommer & Margit Schratzenstaller, 2019. "Sustainability-oriented Future EU Funding. A European Border Carbon Adjustment," WIFO Working Papers 587, WIFO.
    9. M. Murty, 1996. "Fiscal federalism approach for controlling global environmental pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(4), pages 449-459, December.
    10. Veronika Solilová & Danuše Nerudová, 2018. "Výnosový potenciál společného konsolidovaného korporátního základu daně v Evropské unii [Revenue Potential of the CCCTB in the European Union]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(1), pages 78-98.
    11. Xavier Timbeau, 2015. "A diverging Europe on the edge: The independent Annual Growth Survey 2015," Sciences Po publications info:hdl:2441/4s2r6d8kua9, Sciences Po.
    12. Taheripour, Farzad & Khanna, Madhu & Nelson, Charles, 2005. "Welfare Impacts of Alternative Public Policies for Environmental Protection in Agriculture in an Open Economy: A General Equilibrium Framework," 2005 Annual meeting, July 24-27, Providence, RI 19317, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Luìs, Galindo & Giulio, Guarini & Gabriel, Porcile, 2020. "Environmental innovations, income distribution, international competitiveness and environmental policies: a Kaleckian growth model with a balance of payments constraint," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 16-25.
    14. Jacobs, Bas & de Mooij, Ruud A., 2015. "Pigou meets Mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 90-108.
    15. Margit Schratzenstaller, 2017. "The Next Multiannual Financial Framework (MFF), its Structure and the Own Resources," WIFO Studies, WIFO, number 60722.
    16. Richard S.J. Tol, 2017. "The Private Benefit of Carbon and its Social Cost," Working Paper Series 0717, Department of Economics, University of Sussex Business School.
    17. Alexander Krenek & Mark Sommer & Margit Schratzenstaller, 2021. "A WTO-compatible Border Tax Adjustment for the ETS to Finance the EU Budget," WIFO Working Papers 596, WIFO.
    18. Jacobs, Bas & de Mooij, Ruud A., 2015. "Pigou meets Mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 90-108.
    19. European Commission, 2013. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2013 Report," Taxation Papers 38, Directorate General Taxation and Customs Union, European Commission.
    20. Claudia Kettner-Marx & Daniela Kletzan-Slamanig, 2018. "Carbon Taxes from an Economic Perspective," WIFO Working Papers 554, WIFO.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wfo:wstudy:58888. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz). General contact details of provider: http://edirc.repec.org/data/wifooat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.