Plane Truths

The international aviation industry is conspicuous by its absence from international and national targets for emissions reductions. It is also the fastest-growing source of greenhouse gas emissions in developed countries.

The impact of climate change, coupled with the threat of oil production reaching its peak and then declining, is challenging us all to learn to live with far fewer fossil fuel resources. There is overwhelming evidence of an urgent need for concerted global action to reduce greenhouse-gas emissions rapidly and significantly.

Despite the overwhelming environmental case for curbing aviation growth to ensure that we are able to make the cuts in emissions we know are needed to avert potentially irreversible climate change, the aviation industry and its supporters say that there are compelling economic arguments in favour of continued growth. They argue that aviation growth: helps power the engine of international trade and global business, brings significant benefits to the UK economy, ‘democratises’ travel by enabling more people on lower incomes to take advantage of low-cost flights and provides a lifeline to the economies of poorer countries that are particularly reliant on income from international tourism.

This report from nef (the new economics foundation) and the World Development Movement (WDM) examines these economic arguments, assesses their worth and exposes the plain truths. It focuses in particular on the relationship between aviation, tourism and development in poorer countries. To do this, we analysed the potential economic impact of curbing UK aviation growth on four leading UK tourist destinations – Kenya, the Maldives, Thailand and the Dominican Republic. In each case, our analysis of real economic benefit to those nations reveals that, once we account for the money which effectively ‘leaks’ out of those economies to foreign-owned companies and imported resources, the impact is marginal (see Table 1). Kenya, the Maldives and the Dominican Republic are also three of the most vulnerable nations to the impacts of climate change.

We have also considered the aviation industry’s claims that technological advances will empower airlines to neutralise the environmental impact of aviation growth by enabling them to become cleaner and greener in the near future.

Having examined the case made by the aviation industry, our conclusion is that:

• Growth in the aviation industry cannot be maintained if we are to make the cuts in UK emissions of between 80–90 per cent below 1990 levels we know are necessary to make our contribution to avert a dangerous accumulation of greenhouse gases;
• Since the overwhelming majority of tourists travel within regions, not between them, rail can replace air travel in key markets;
• Many of the claimed benefits of tourism to local people in developing nations are lost to international actors;
• In the UK (and globally) air travel remains the preserve of the wealthy.

It is clear that more research and a proper debate are needed because the economic case for growth advanced by the aviation industry is at best flimsy and at times fundamentally flawed. It is also clear that the policy measures put in place so far to mitigate the environmental impact of aviation, such as Air Passenger Duty (APD) in the UK and the European Union (EU)’s emissions trading scheme, will have little impact on the strong and environmentally destructive growth trend that we report. What is needed instead is a bold package of measures that use a combination of carrot and stick to significantly reduce demand for air travel – including substantial investment in high-speed rail links and high taxes on short-haul flights for which alternative modes of transport are often available.

‘Plane’ truths:
Why the economic arguments in favour of aviation growth just don’t fly

Growth in the aviation industry is environmentally unsustainable
Between 1990 and 2000 global CO2 emissions grew by 13 per cent. Over the same period CO2 emissions from aviation and road transport both grew by 25 per cent.2 In the UK, aviation emissions grew far faster – by 80 per cent between 1990 and 2000.

Air travel is now the primary mode of transport for international tourism – estimated to account for 43 per cent of all travel associated with tourism. Estimates of the impact of the aviation industry on emissions have tended to undercount the impact of the industry on emissions. In 1992 the aviation industry was estimated to be responsible for approximately two per cent of global CO2 emissions. But a more recent estimate that includes other climate effects implies that this is more like four to nine per cent.

It is in industrialised countries, overwhelmingly responsible both currently and historically for the levels of concentration of greenhouse gases in the atmosphere, which have the responsibility to act first and to do the most to reduce emissions, where the contribution of aviation to emissions is most significant. In the UK, for example, aviation accounts for approximately 6.3 per cent of CO2 emissions. Applying a conservative multiplier to allow for effect of other climate effects this equates to 12.6 per cent of the country’s contribution to climate change.

And it is set to get worse. Air travel is set to double in the next ten years unless restrictions are imposed. The UN World Tourism Organization (UNWTO) forecasts that international tourist arrivals will increase from 800 million in 2005 to 1.1 billion in 2010 and nearly 1.6 billion in 2020. If this forecast proves correct, we can expect tourist arrivals to grow by just over four per cent each year over the next decade, with a five per cent growth in tourists travelling by air.

The economics of tourism, aviation and international development don’t add up
The tourism and aviation industries are quick to identify the economic importance of tourism for developing nations in their defence. But our analysis shows that the vast majority of tourism occurs within regions, not from one region to another. Since tourism within regions is expected to grow more than tourism between regions (which is heavily dependent on long-haul flights), there is a case for developing efficient and equitable alternatives to air travel, such as good networks of high-speed rail links.

The benefits of tourism to the economies of developing nations has been significantly and systematically over-estimated. The significant role of transnational corporations and other international actors in the tourism sector is well documented. Foreign ownership or control of tourist facilities in developing countries often means that a large proportion of income generated through tourism is repatriated, ‘leaking’ out of the national economy. This means that the real contribution made by tourism to the economies of developing nations can be significantly overestimated. In some cases, leakage of up to 75 per cent, or more, of the money tourists spend have been reported, raising questions about the value that tourism brings to development.

Further questions are now being asked about the benefits of international tourism as a result of climate change and the prospect of peak oil. Is it a good idea for poor nations to be so dependent on an industry that is highly vulnerable to rising oil prices? And what about island nations and other low-lying countries that are likely to be hit first and worst by climate change? What is the wisdom in relying heavily on carbon-hungry international travel that is contributing to rising sea levels, storing up devastating human and economic consequences for the near future? While tourism may bring economic benefits to some areas in the shorter term, in many places such benefits are likely to be far outweighed by the impact of climate change.

Who really benefits? The rise and rise of short-haul flying
This report makes the case for a package of measures to curb aviation emissions that would benefit the UK economy and help support a transition to a more sustainable economic picture in the developing world. We believe that one of the ways in which this can be achieved is using targeted taxation to reduce demand for short-haul flights. These create more emissions per passenger kilometre and account for a significant proportion of the passenger flows from UK and other EU airports, but contribute little to economies in the developing world:

• Three in every four flights from the UK are short haul. Approximately 70 per cent of flights leaving the UK are to destinations within the EU-25.
• According to one estimate, 45 per cent of all European flights are over distances of less than 500km. Yet evidence suggests that high-speed trains can provide a quality of service better than or equal to the air equivalent for distances of 500km or more. This means that many of these journeys have the potential to transfer to high-speed rail – particularly as recent airport security concerns have led to longer and more inconvenient check-in. And investment in rail links works. A recent analysis suggests that flights between London and Manchester have fallen as a result of £7 billion improvements to the rail link between the two cities. The Civil Aviation Authority (CAA) reports that BMI, the UK’s second-largest full-service airline, suffered a 26 per cent drop in passenger numbers between Heathrow and Manchester between September 2004 and October 2005.
• According to statistics from the Civil Aviation Authority, only nine per cent of flights from UK airports (excluding domestic flights) are to nations in the ‘global south’ – defined as countries of low or medium development according to world development indicators. Just four per cent of flights from the UK are bound for Africa, three per cent for Asia (excluding Hong Kong, Singapore and Japan) and two per cent for the Caribbean and South or Central America.

Curbing short-haul flying from industrialised countries would not only have a negligible effect on developing world economies but it would also target journeys for which a viable alternative to air travel is more likely to be available:

• Less than 20 per cent of tourism trips within Europe in 2000 were based on air travel.
• Only five per cent of tourist journeys from European airports are intercontinental. Even allowing for the fact that some journeys within Europe are dependent on air travel, the percentage of all current journeys that are flight-dependent is relatively small.

Air travel: An illusory democracy
In the UK the rapid expansion of airports has been justified by talking about the ‘democratisation’ of air travel – presenting flying abroad on holiday as something that should be accessible and affordable for all. Social analysis reveals, however, that air travel overwhelmingly remains a choice made by more wealthy people.

Those with the highest incomes are disproportionately responsible for emissions from aviation. Research at a London airport, for example, shows that in 2005, people from the highest socio-economic groups took 40 per cent of all low-cost flights (domestic and EU bound) from the UK – even though these groups account for only 24 per cent of the population. In contrast those at the bottom of the income scale (DE) fly least, accounting for only 7.7 per cent of these low-cost flights, although they make up 32 per cent of the UK population. Trips by those in the lower-income bands fell between 2000 and 2004. The proliferation of cheap flights may have widened the base of those who fly, but it has done little to change a picture in which those who benefit most from aviation, are those who already have most.

Aviation and the UK economy: taking the UK into the red

We found that the airline industry’s claim to support the UK economy appears overstated:

• In effect, the absence of any tax on aircraft fuel or any VAT on ticket sales provides the industry with a significant government subsidy. In 2007 the World Development Movement (WDM) estimated that this subsidy amounted to approximately £10.4 billion per year. This is nearly 850 times more than the UK’s annual spending on flood defences or over 120 times more than what the government spends each year on research and development for renewable energy. This is also double the estimated £5 billion investment needed to ensure that the UK’s entire housing stock was insulated.
• The aviation industry claims it contributes to 1.1 per cent of the UK’s total GDP per year (£11.4 billion in 2004). This suggests that even before the environmental and social costs of the impact of aviation industry’s operations are taken into account, the industry’s net contribution to the UK economy when compared to the effective subsidiers it receives, is negligable.

Conclusion
If we are to stabilise emissions within the range compatible with preventing catastrophic climate change, the aviation industry must be brought within national and international emission reduction targets.

As a first step, developed countries such as the UK need to halt growth in emissions from aviation in order to make the level of emissions reductions needed to prevent catastrophic climate change which will impact first and worst on the world’s poorest people. This could partly be done through limiting the number of short-haul flights in regions such as the EU, without any impact on the economies of developing countries.

Our analysis also shows that halting the growth in UK aviation would have little impact even on the economies of those developing countries that receive a relatively large number of UK tourists. Instead of expanding aviation to increase the number of people travelling to developing countries, it would be more beneficial to introduce policies that keep more of the tourism revenues within developing countries.

In the longer term, when emissions and air travel are reduced, the impact of this must be managed in a way that enables a transition towards more sustainable models of development for those nations that have pursued models of development based on international tourism.

In the light of this report, we argue that the UK Government should:

Ensure that the Climate Change Bill, currently passing through parliament is fit for purpose:

• Include all emissions from aircraft and shipping in the Climate Change Bill currently passing through parliament;
• Include mechanisms in the Climate Change Bill to ensure that emissions are cut in the UK, rather than allowing industries such as aviation to carry on with business as usual by buying carbon credits to meet reduction targets;
• Revise emissions reduction targets for the UK set out in the Climate Change Bill to 80–90 per cent below 1990 levels; the targets the most up-to-date scientific research suggests are necessary.

Halt planned airport expansion, and ensure that proposed taxes on flights reduce demand for short-haul flights:

• Halt plans for airport expansion in the UK, such as allowing a third runway to be built at Heathrow airport, and a second runway at Stansted;
• The tax on flights set to replace Airport Passenger Duty in 2009 should be set at a proportionally higher rate for short-haul flights than long haul; be varied according to aeroplane type, and include transfer passengers and freight. Evidence suggests that it must be set at a higher rate than the current level of APD if it is to influence behaviour and reduce demand;
• The proceeds from such a UK tax could be split between contributing towards the investment needed for improvements in the rail network, and providing funds to developing countries to help adaption to climate change and support low-carbon infrastructure.

Play an effective role in managing curbs in aviation effectively so that it does not impact developing nations:

• Where developing nations are dependent to a degree on international travel, curbing aviation must be managed carefully. We believe it makes sense to weight taxation so that one of the main influences on behavioural change – the cost of travel – is applied more stringently to short-haul flights. A tax structure weighted against short-haul flights could stall the growth of the multiple short-break market without significantly affecting long-haul flights to those developing nations reliant on tourism for development;
• The best way to tackle aviation emissions would be an international tax on aviation fuel, set at a high enough level to prevent catastrophic climate change impacts. Much of the revenue from such a tax could go to developing countries to support climate change adaptation and development of low-carbon infrastructure, as well as to compensate for any loss in revenue from a fall in tourism. Unfortunately there has been no sign yet of this materialising through the UN’s International Civil Aviation Organization.

Invest in close analysis of the real impact of aviation, and genuine public debate:

• The economic impact of aviation should be examined more closely and objectively, guarding against taking industry claims at face value;
• This closer scrutiny should include a vigorous public debate about how aviation is taxed and how public money is spent.

This report suggests that the airline industry needs to be wrenched from its fossil-fuelled fantasies if we are to have a chance of reducing emissions by the levels required to avert catastrophic climate change. Far from jeopardising economic development in the world’s poorest nations, curbing aviation growth may have a significant part to play in reducing emissions that threaten the very survival of hundreds of millions of people in developing countries.