Research

Area: Environment Group
Title: Developing and delivering Green Fiscal Reform
Start Date: 01-05-2010
End Date: 31-05-2010

Project leader(s):

Ben Shaw

Sponsor:

Esmée Fairbairn Foundation and Ashden Trust

Status:

Current

Summary

In October 2009, the final report of the Green Fiscal Commission was published – The Case for Green Fiscal Reform. The headline message from the Commission’s work was that green fiscal reform is a crucial policy to get the UK on a low-carbon trajectory, helping to develop the new industries that will both keep the UK on this trajectory and provide competitive advantage for the UK in the future. Green fiscal reform would also contribute to restoring UK fiscal stability after the recession. Green fiscal reform is therefore key to future environmental sustainability and low-carbon prosperity. Full details of the Commission’s work and findings are available from www.greenfiscalcommission.org.uk.

Policy Studies Institute provided the Secretariat for the Green Fiscal Commission and is now conducting follow-up work in partnership with Green Alliance, the influential environmental think tank, to research, develop and communicate specific packages of green fiscal reform consistent with the Commission’s findings that could be implemented in the short term.

The first area that has been examined is aviation taxation. Aviation as a sector is currently under-taxed, both in comparison to the amount that other sectors contribute to public finances and also given its large and growing environmental impacts. The new coalition government has indicated its desire to introduce an aviation tax based on a per-plane duty. At a time when the two central public policy challenges to be addressed are the state of the public finances and the need to take firm action to meet our climate change targets, changing the basis of aviation taxation could result in greater revenues for government and a clearer environmental signal to aviation operators and passengers.

The briefing ‘A new basis for aviation taxation: A briefing on the introduction of an aviation tax based on a per-plane duty’ was published in June 2010 and gives details of our findings in this area. Green Alliance has also published a parallel briefing, ‘Making Aviation Pay Its Way’, which argues that replacing Air Passenger Duty with a Per Plane Duty would incentivise airlines to increase plane occupancy and reduce the overall number of flights.

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