The world’s most climate-vulnerable countries scored a victory at COP28 when delegates agreed to implement a Loss and Damage Fund. The fund aims to collect money from wealthier countries and provide it to developing nations contending with the worst impacts of global warming.

But to have a real impact, the fund needs diverse and long-lasting revenue streams, in addition to pledges already made by some national governments. That’s why various taxes have been proposed over the years, including levies on aviation, maritime shipping, and financial transactions.

In light of the COP developments, we analyzed how much revenue a tax on airplane tickets could raise for the Loss and Damage Fund. Such a tax would provide a more stable and scalable funding source than voluntary, typically one-off financial assistance from wealthier countries.

Table 1 shows that $164 billion could be raised in a year if economy-class tickets were taxed at $30 each and premium-class tickets at $120 each. We selected $30 for economy seats based on the air passenger levy proposed by the United Nations Special Rapporteur on Human Rights and the Environment. In a 2021 policy brief, the special rapporteur (an independent expert appointed by the United Nations) outlined a tax of $10 to $75 for economy and business tickets to help pay for climate-related losses, damages, and adaptation. We put the levy at $120 for premium-class seats because our research shows that premium seating is 2.6 to 4.3 times more carbon-intensive per person than economy seating. Exempting economy tickets to and from lower-income countries would help ensure that the tourism industry and nascent aviation market in those countries are not unduly burdened. Such an exemption would reduce the total tax revenue collected by $19 billion. Taxing just international flights still results in a sizeable chunk of revenue: $68 billion a year or, with the exemption, $58 billion a year.

Table 1. Example ticket tax revenues raised by flight type, seating class, and country income levels.

a Flights are attributed to “lower-income” countries if they depart from or arrive in a country that is classified as low income or lower middle income by the World Bank; the remaining flights are attributed to “higher-income” countries for the purpose of this analysis.

b These are example tax rates for modeling purposes, not ICCT policy proposals.

c Number of tickets and potential revenue exempted if economy-class tickets for flights to and from lower-income countries are not taxed.

There are already examples of such taxes. The French “solidarity tax on airplane tickets” charges €2.63-63.07 per ticket to finance efforts by the global health initiative Unitaid to combat infectious diseases in the Global South. The tax raised over €1 billion in its first decade. Though this tax is only one example, it suggests that aviation taxes can be used to raise significant funds for international causes.

Moreover, the ICCT’s previous research found that certain aviation tax policies can be a more equitable way to raise revenue from those most responsible for the sector’s emissions. A tax on frequent flyers would raise 90% of its revenue from the richest 10% of the global population.

There are, however, competing needs for the revenues from a potential aviation ticket tax. Decarbonizing international aviation will require up to $5 trillion in technology investments by 2050. We recently published an analysis showing that these investments—in order to have the greatest and quickest impact on reducing greenhouse gas emissions—should be prioritized early in any taxation scenario and focused on emerging technologies.

Policymakers could, therefore, consider frontloading aviation tax revenues for mitigation in the near term and then gradually shift toward financial assistance related to loss and damage and to helping developing nations adapt to climate change. In addition, revenue from a domestic ticket tax could be earmarked for subsidizing sustainable aviation fuels within the country, while an international ticket tax can fund mitigation, adaptation, and loss and damage. Figure 1 illustrates how revenue could be apportioned over 30 years, using the same per-ticket taxes as outlined above.

Figure 1. Example allocation structure of aviation ticket tax revenue, assuming 50% of the revenue from international flights initially and an increasing share of all revenues (up to 80% domestic and 100% international) can potentially be used to help vulnerable countries with adaptation efforts and loss and damage.

Even if new aviation taxes went solely to the Loss and Damage Fund, the revenues will likely fall short of the need. Some studies project loss and damage needs of at least $400 billion each year. But even limited funding could have a huge impact for some countries. Small island developing states (SIDS) are typically extremely climate vulnerable but need less funding per disaster because of their small populations and geographic areas. Damage mitigation for the 2022 floods in Pakistan was estimated at $16.3 billion, 92 times higher than the $177 million requested by the island nation of Vanuatu for the entire country’s loss and damage that year.

In the best-case scenario, aviation can contribute to the funding mix for loss and damage, as long as such taxes are equitably designed with the goals of both decarbonizing the industry and helping those nations most injured by climate change.

About this event

The ICCT in collaboration with NITI Aayog is organizing a one-day workshop on Low Emission Zones (LEZs) in Indian cities. LEZs, designated areas where certain vehicles, particularly those with high emissions, are restricted or prohibited, have proven effective in reducing air pollution worldwide. Additionally, LEZs play a crucial role in promoting the adoption of electric vehicles, aligning with NITI Aayog’s proactive advocacy in this area.

Our workshop, in association with the Raahgiri Foundation & SUM Network, is scheduled for February 19, 2024 in New Delhi, and aims to raise awareness about LEZ benefits, discuss best practices for LEZ implementation in Indian cities, and formulate a roadmap for future actions.

The workshop will include discussions on the following topics:

1. The benefits of LEZs for air quality and public health
2. Case studies of successful LEZs from around the world
3. Experiences in implementing LEZs in Indian cities
4. Legal pathways for developing LEZs in India
5. The role of technology in supporting LEZ implementation

The workshop will, we believe, significantly contribute to ongoing efforts to improve air quality and enhance EV adoption in Indian cities.

In July 2023, the International Maritime Organization (IMO) adopted a revised strategy that calls for reducing greenhouse gas (GHG) emissions from ships to net-zero by or around 2050. While the revised strategy is not legally binding, the measures used to implement it can be, and in many ways it’s the stringency of these measures that will ultimately determine shipping’s contribution to future global warming.  

Earlier this week, our colleague highlighted the need for measures that limit emissions from ships measured on a life-cycle basis, the well-to-wake (WTW) emissions. With this blog post, we show how one proposed measure, the GHG Fuel Standard (GFS), can be used to reduce emissions in line with the IMO’s revised 2023 strategy or with a pathway consistent with limiting warming to 1.5°C. 

The GFS being designed now will require ships to use fuels that emit fewer WTW GHG emissions until there is a complete transition to all zero-emission fuels. This GFS is meant to encourage the adoption of new fuels including renewable e-fuels (hydrogen, ammonia, and methanol) and sustainable biofuels; by setting limits on the GHG emissions intensity of fuels, it will drive investments in production capacity and infrastructure for new fuels. One effective design of the GFS would identify the date by which the WTW GHG intensity of marine fuels is to reach zero and include interim GHG intensity targets (at regular intervals) to keep the sector on a steady course toward its final goal. Here we use ICCT’s new Polaris model to estimate the WTW GHG intensity reductions that would be needed to achieve net-zero by 2050 in a pathway consistent with the 2023 IMO GHG strategy. Polaris is a global maritime emissions projection model that reports tank-to-wake (TTW) and WTW emissions as carbon dioxide equivalents (CO₂e) based on the 100-year or 20-year global warming potentials of CO₂, methane, nitrous oxide, and black carbon (we exclude black carbon in this particular analysis because it’s not accounted for in the guidelines on life-cycle GHG intensity of marine fuels). 

Figure 1 shows the straight-line GFS trajectory that satisfies the emissions reduction targets in the 2023 IMO GHG strategy and an S-curve trajectory that would stay below the cumulative emissions limit for 1.5°C estimated here. The GFS trajectories were determined based on the business as usual (BAU) predicted energy use from the Polaris model and target emissions in the 2023 IMO strategy and 1.5°C aligned pathways (using 100-year global warming potentials, GWP100). For 2030, the 2023 IMO strategy set a goal of at least a 20% reduction in absolute GHG emissions compared to 2008 levels, and “striving for” a 30% reduction; for 2040, the GHG reduction goals are at least 70% and striving for 80% below 2008 levels. Predicted energy use from Polaris goes from 10.7 EJ in 2023 to 14.5 EJ in 2050, and we estimated the baseline GHG intensity of marine fuels at 92.5 gCO₂e/MJ from shipping’s fuel mix in 2019 using ICCT’s Systematic Assessment of Vessel Emissions (SAVE) model and excluding black carbon emissions. 

Figure 1. Well-to-wake GHG intensities of marine fuels required to align the IMO GHG Fuel Standard (GFS) with IMO’s 2023 GHG strategy and a 1.5 °C-compatible emissions trajectory.

As Figure 1 illustrates, to achieve the minimum IMO targets, the GHG intensity of marine fuels will have to reduce by 18% to 76 gCO₂e/MJ by 2030 and by 72% to 26 gCO₂e/MJ in 2040 compared to the 2019 baseline. For the “striving” scenario, reductions in 2030 and 2040 will have to be 28% to 67 gCO₂e and 81% to 17 gCO₂e/MJ, respectively. A 1.5°C-aligned pathway requires 32% reductions in WTW GHG intensity in 2030 to 63 gCO₂e/MJ and 99% in 2040 to nearly zero GHG emissions. All pathways require 100% reductions by 2050. Following the GHG intensities in Figure 1 would result in the absolute emissions reduction pathways presented in Figure 2.

Figure 2. Absolute well-to-wake GHG emissions trajectories under each scenario.

Table 1 specifies the GHG intensity limits needed to follow the absolute emissions reduction pathways in Figure 2. This table can be used by policymakers as they develop the GFS.

Table 1. Well-to-wake GHG intensities (gCO₂e/MJ) and reductions in well-to-wake GHG intensities of marine fuels from the 2019 fossil fuel baseline needed to align the GFS with different emissions trajectories.

The cumulative WTW CO₂e emissions compared to “well-below” 2°C (interpreted by us as keeping warming to not more than 1.7°C) and 1.5°C limits are presented in Figure 3. Achieving the minimum or striving IMO targets is consistent with limiting warming to well-below 2°C and the S-curve is consistent with 1.5°C.

Figure 3. Cumulative well-to-wake GHG emissions from 2020-2050 implied by each scenario.

The 2023 GHG strategy also includes a target for the uptake of zero or near-zero GHG emission fuels and/or energy sources that should represent at least 5% (striving for 10%) of the energy used by international shipping by 2030. Achieving even the minimum 5% energy target in 2030 would require 0.6 EJ of zero/near-zero fuels. To put this target into perspective, 0.6 EJ represents around 14% of global biofuel demand in 2022 (~4.3 EJ), whereas shipping (~11 EJ/year) represents about 2.5% of global energy demand (~442 EJ/year). When considered in the context of the limited availability of sustainable advanced biofuels for use in shipping, this underlines the importance of scaling up e-fuels to achieve IMO’s target. 

The stronger the GFS targets, the greater the demand for zero/near-zero GHG emission fuels, the fewer GHGs emitted by the sector, and the greater the likelihood that shipping aligns with both IMO’s GHG strategy and the Paris Agreement. The next opportunity for IMO delegates to contribute to the design of the GFS is at the meeting of the 16th Intersessional Working Group on GHG emissions from ships in March 2024.