Planes, Ships and Taxes: Charging for International Aviation and Maritime Emissions

49 Pages Posted: 15 Oct 2013

See all articles by Michael Keen

Michael Keen

International Monetary Fund (IMF) - Fiscal Affairs Department; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS)

Ian Parry

International Monetary Fund (IMF)

Jon Strand

World Bank

Date Written: October 2013

Abstract

International aviation and maritime transport account for a significant and growing share of global carbon emissions. Yet they are not only excluded from the Kyoto agreement and all current carbon pricing schemes, but do not even pay fuel excises of the type standard for other transport activities. Moreover, each sector benefits from preferential tax treatment – failure to charge VAT on international aviation, and the application of tonnage tax regimes rather than the normal corporate tax in maritime. This paper considers the design of fuel charges in these sectors to address these distortions, and quantifies their impact on emissions, revenue and welfare – showing, amongst other things, that the gain from offsetting the pre‐existing tax distortions may be as significant as those from reducing emissions. It shows, too, how compensation schemes can be designed to protect the poorest countries – a key ingredient in the politics of the issue, given the practical need for wide applicability of such charges. The real challenge is to amass the degree of international cooperation required (especially strong for maritime), failure of which to some degree explains their current under‐taxation – and, unsurprisingly, to decide who gets the money. Technically, these charges should, if anything, be rather easy to implement.

Suggested Citation

Keen, Michael and Parry, Ian and Strand, Jon, Planes, Ships and Taxes: Charging for International Aviation and Maritime Emissions (October 2013). Economic Policy, Vol. 28, Issue 76, pp. 701-749, 2013. Available at SSRN: https://ssrn.com/abstract=2340264 or http://dx.doi.org/10.1111/1468-0327.12019

Michael Keen (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Ian Parry

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jon Strand

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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