‘Travel Shaming’ Taxes Hit The Wrong Target
Germany announced proposed hikes in the taxes applied to air travel, with corresponding decreases in the tax on rail travel. Effective from April 2020, air ticket taxes for flights out of Germany will increase by 75 percent to 13.03 euros (about $14.50) for flights up to 2,500 km (1,563 miles), 33.01 euros for flights from 2,501 to 6,000 km, and 59.43 euros for flights of 6,000 km or longer. At the same time, rail ticket tax will decrease from 19 percent to 7 percent. The Germans are also considering implementing rules forbidding airlines from selling tickets below cost. The avowed purpose is to reduce carbon emissions by discouraging air travel. And although currently just a proposal, folks in the industry consider it a done deal. Other European countries are considering variations on the same theme of taxing airline tickets as a way to reduce carbon emissions.
But proposals I’ve seen to date are going at it backward. Countries use taxes for two primary objectives: to increase revenue or to modify market behavior. Although increased air ticket taxes will also increase revenue, the main purpose here is to reduce the amount of air travel. And modifying behavior works well only when consumers have an adequate alternative:
— European travelers taking short trips have attractive alternatives to flying. France, Germany, Italy, Spain, Switzerland, the UK, and the Benelux countries enjoy a dense railway network, with frequent high-speed or at least fast trains on all major intercity routes. Travelers there can easily switch from flying to taking trains. Short flights are the easiest trips to divert to rail, with the least burden on travelers. So, if the objective is to decrease air travel most efficiently, the highest taxes should apply to short-haul flights. Widespread diversion to rail would be a positive outcome.
— But travelers on long-haul trips — and especially intercontinental trips — have no realistic options other than flying. So a tax designed to discourage flying will increase the cost of travel and have a direct negative impact on the local tourist economy. Ideally, therefore, taxes should be lowest on trips for which travelers have no alternative to flying. High long-haul air taxes will have largely a negative outcome.
For now, there is no feasible alternative to jet fuel for anything but very short flights.
Producing biofuel may decrease the carbon load, but it makes no difference when powering a jet. Non-carbon fuel options for short-haul air travel are becoming available, most notably electric propulsion. But for the foreseeable future, battery weight will limit electric aircraft to short-range flights. Similarly, the weight of containers necessary to hold hydrogen will limit its use. For now, there is no proven feasible alternative to petroleum or biofuel for long flights. Because aviation contributes something like 2.5 percent of total carbon emissions, we’d be better off targeting larger contributors and leaving air travel alone. If a government wants to limit carbon emissions by reducing flying, with a minimum of pain for individual travelers, the best place to start is by taxing short-haul trips in heavily populated areas with good rail service.
The take-away for U.S. travelers is simple: For European travel next year, avoid excessive taxes on intercontinental travel and plan to use trains for travel within Europe whenever you can. If you’re considering flying to Germany, the only U.S. gateway falling below the 6,000-km mark is Boston, where the German tax will be about $37. From any other U.S. gateway, the new tax will add something like $66 to the price of a ticket. That’s enough to maybe make you think of using a different European gateway such as Amsterdam, Brussels, Copenhagen, Zurich, Milan, or Paris.
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