- A review of existing studies in the area
4.7 Discussion of the fuel tax studies reviewed
In general, most of the studies expect that the demand growth will be reduced by little less than one percent over the business as usual scenario for each percent the tax raises airfares, while most studies expect new aircraft to become approximately 1%
more fuel-efficient per annum. At tax rates of around 20US¢/kg studies generally expect growth in demand for air travel to be reduced by some 10% as compared to a business as usual scenario, because such a tax level is expected to raise average fares by around 10%. One study suggests that at current growth rate of 3% in CO2 emissions from commercial civil air transport a kerosene tax of some 80-130US¢/kg may be needed to stabilise global emissions at current level [Bleijenberg et. al 1998].
Another study calculates that to reduce fuel use by 5% in 2010 as compared to 1990 a tax rate of around 180 US¢/kg might be needed [Wickrama 2001]. A main explanation for the difference between these two studies is that the latter study has lower expectations for fuel-efficiency improvement. Another study [DIW 2000] anticipates that even if implementing a 231US¢ per kg fuel tax in Europe the fuel consumption may increase by 50% within 20 years, see Table 4.4. Yet another study [Olsthoorn, X.
2001], which has not been included in Table 4.4, estimates that to stabilise commercial civil air transport CO2 emissions at the current level in 2050 a fuel tax of at least 150 US¢/kg would be needed. This is for a BAU scenario where CO2 emissions are only forecast to increase by a factor of 2,9 within the next fifty years. Within this same study it is concluded, that CO2 emissions may grow by between a factor of 2,9 and 6,1, and a much higher kerosene tax than 150 US¢/kg may therefore be needed to stabilise CO2
emissions at current level.
Most studies reviewed here anticipate as a basis quite high growth rates in air travel and freight, mainly basing it on forecasting historical trends. Forecasts are based on the assumptions that continuing economic growth and increasing income combined with reductions in real airfares will allow such demand increases. Furthermore, studies seem to assume that adequate airport infrastructure will be provided to meet the rising demand. This is another crucial assumption considering that it is becoming increasingly difficult for airports to get approvals for enlarging their capacity in many industrialised countries. The studies reviewed tend to extrapolate historical trends in air travel and freight volumes without taking into consideration that some factors like economic satiation, environmental problems or resource scarcity, may on the longer term reduce the business as usual growth. Sooner or later the commercial civil air transport industry may reach a stage of maturity and therefore some sort of gradual reduction of the growth rates may be a reasonable assumption. A lower growth rate assumption would reduce the level of tax needed to reach a certain reduction target for demand. Chapter 5 discusses further the issue of growth versus environment. The key issue here seems to be that current growth rates in commercial civil air transport are not compatible with environmentally sustainable development.
The choice of demand elasticity assumption is another crucial parameter affecting the calculations. The demand elasticity estimates, based on previous experiences, may not adequately take into account that the real price of air travel and freight has never before increased for a longer period of time. In fact, the average real fares have been reduced almost continuously ever since the early days of commercial civil air transport, see Figure 2.10. Therefore, the demand elasticity may be higher than expected if real airfares rise substantially (as will be the case if a fuel tax of for example 126 US¢/kg is promptly introduced).
The knowledge on the long-term effects of fuel price increases on the fuel intensity is relatively poor. One reason is that the previous fuel price rises have lasted for a relatively short period of time. Another reason is that other factors than the fuel price have influenced the real airfares and the airlines’ fuel-efficiency, some main parameters being the introduction of relatively fuel-efficient high-productivity wide-body jets in the early 1970s and increasing load factors. Future gains in these parameters are likely to be of a more incremental character.
Concerning the possible development of radically more fuel-efficient aircraft and engines and alternative fuels the lead-time can be relatively long because of the large investments required and the time needed for research and development and because of need for testing of new technologies due to concerns over safety and other issues like noise and emissions. If looking at specific technologies, like for instance aircraft fitted with propfan35 engines or high-speed turboprops cruising at slower speed and altitude than turbofans, the kerosene price increase will have to outweigh the airline cost increases induced by time losses due to lower speed. Such specific areas are generally not discussed in detail in the studies reviewed. However, one study [Bleijenberg et. al. 1998] has a higher expectation for the fuel efficiency improvements than for example CAEP’s study [Wickrama 2001]. One of the main differences is that Bleijenberg et. al. [1998] expect that propfan engines will be introduced throughout all size categories of the fleet and that lower operating speeds will be deployed. This assumption has been criticised by various sources for not taking adequately into account the costs barriers connected to operating at lower speeds [Dings 2000b, Annex VIII, pp.1-6]. Another critique raised is that the technological barriers to meeting airworthiness and the potential problem of fan blade containment and the increased cabin and ground level noise of propfan engines may disfavour the technology compared to turbofan engines [Wickrama 2001, p. 57] [Dings 2000b, Annex VIII, pp.23-31]. Thus, the lower estimates given by Bleijenberg et. al [1998] for the level of kerosene tax needed to stabilise the CO2 emissions from commercial civil air transport (80-130 US¢/kg) may be too low if such radically improved technologies do not emerge.
35 A propfan engine is an advanced type of turboprop engine featuring highly swept blades than can rotate at higher speeds than current turboprops. For example, General Electric presented and tested a so-called UDF (un-ducted fan) prototype counter-rotating propfan engine in the