By 2050, the costs of adapting to climate change in developing countries could reach US$100 billion per year, according to estimates from UNDP and the World Bank. New and additional sources of funding for adaptation are desperately needed.
The International Air Passenger Adaptation Levy (IAPAL) - a proposed new purchase tax on air tickets - offers a potential source for these funds. In its first year IAPAL could raise up to $10 billion for adaptation, and considerably more in the longer term. It is not a mitigation measure, however, since it does not intend to reduce flight numbers and therefore aviation’s contribution to climate change.
This paper updates the key assumptions made in the original paper proposing this scheme by Hepburn and Müller in 2006. It analyses the nature of current international agreements to determine the feasibility of introducing IAPAL. There is no clear reason why IAPAL could not be introduced alongside existing international agreements and mechanisms. Because demand for international flights does not readily change with small variations in price, IAPAL would not have a significant impact on demand – and any losses in demand would be offset by increases in overall demand for air travel.
Download our paper here.