Flight ticket taxes in Europe: Environmental and economic impact

Valeria Bernardo, Xavier Fageda and Jordi Teixido

Transportation Research Part A: Policy and Practice, 2024, vol. 179, issue C

Abstract: We examine the causal impact of flight ticket taxes on airline flights and derived CO2 emissions and analyse its distributional effects between airlines and travellers and within travellers. We use a dataset on flights within Europe at the airline-route level and apply a staggered difference-in-differences approach considering potential bias of the standard two-way fixed effects and the potential distorting effects of heterogeneities between treated and control routes. The main analysis focuses on low-cost airlines because connecting passengers are typically excluded from the tax. We find that flight ticket taxes have a significant overall effect on low-costs airlines supply and derived emissions: ticket taxes reduce the number of flights per airline-route by 12% on average compared to the counterfactual scenario, resulting in a 14% reduction in carbon emissions. In addition, we estimate a pricing equation using a quantile model to identify the cost pass-through rate over the distribution of the fare variable. The burden of the tax is higher for passengers paying low fares, so taxes have a stronger effect on avoidable flights with less added value and a smaller internalization of the total costs of flying.

Keywords: Flight ticket taxes; Climate change costs; Diff-in-diff; Europe (search for similar items in EconPapers)
JEL-codes: D22 L93 Q54 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.tra.2023.103892

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