Overview
Air Passenger Duty (APD) was introduced on UK flights in 1994 in a simple two band structure. It was only in 2007 though that APD rates began to increase significantly with a four band APD structure introduced in 2009 in an attempt to take better account of the impact different flight lengths had on emissions. These bands were based on the distance between London and its equivalent capital in the destination country. Further APD rate increases were introduced in 2010, 2012, 2013 and 2014.
The Scottish Government made a commitment in Parliament to publish an estimate of the impact that a reduction in Air Passenger Duty (APD) would have on emissions. This note fulfils that commitment by reporting the likely impact from a 50% reduction in APD alongside the methodology used to generate the estimate.
Funding
Results
Reducing APD on flights departing from Scotland is likely to lead to relatively lower airline ticket prices and a particularly marked increase in demand for short haul leisure seats. The impact is estimated to lead to an additional 742,000 seats being sold, most of which attract the reduced rate of APD. These extra trips are forecast to generate an increase in emissions of around 0.034 MtCO2e. While different air fares can and will affect passenger numbers and emissions, the sensitivity analysis carried out suggests the estimated impact on emissions will not change markedly either way from this point estimate.
Adding in the potential of passengers switching from northerly English airports to Scottish airports in response to lower air fares from Scottish airports, (estimated by HMRC to possibly be up to 300,000) raises the emissions impact estimate to between 0.05 MtCO2e to 0.06 MtCO2e.
The estimates generated in this paper should be seen in the context of the uncertainties within the available data. The data were produced for other purposes and adjustments and assumptions have had to be made. That said, benchmarking the results of this analysis against the earlier DfT analysis suggests that the estimate, including the switching effect, is of the right order of magnitude.