There is widespread agreement that the UK should undergo a significant transition from a fossil-fuel based economy to one primarily powered by renewables. This has propelled the UK to take the ambitious step of committing to net zero greenhouse gas (GHG) emissions by 2050.
As an engine of the global economy, aviation will play an important role in this effort. The sector accounts for just 1.9% of GHG emissions globally yet, in the UK, the aviation gross emissions accounts for 7% of the country’s total carbon emissions. This discrepancy highlights the urgency of the government’s decarbonisation targets - targets that have been reinforced by the Jet Zero Consultation aimed at accelerating the design, manufacture, testing, certification, infrastructure and commercial operation of zero emission aircraft and aviation systems.
Fiscal policy in addition to Market Based Measures (MBMs) like emissions trading schemes (ETS) or carbon offsets can facilitate decarbonisation in the aviation sector by aligning industry, government and community interests. When taken together the two policy interventions leverage innovative technologies, trade, investment, tax, and regulation to create the conditions for long-term GHG reductions and sustainable aviation.
No single policy measure will be sufficient to tackle the climate challenge in aviation across the board. Therefore, it is important to find a combination of measures that can best balance the costs to the industry and consumers with the environmental benefits of decarbonisation.
With this in mind, in our report, we reach the following key findings:
- A combination of MBMs and fiscal policy can help bridge the decarbonisation gap, balancing economic costs and environmental benefits
- Fiscal policy design should consider the implications of an aircraft's lifecycle across the value chain
- MBMs and fiscal policy should result in a sustainable balance between community, public and private sector objectives
- Government-industry collaborations can unlock more efficient outcomes by leveraging their respective strengths
By implementing the right combination of proportionate, targeted, and complementary policy tools across the value chain, governments can enable the aviation industry to realise its long-term decarbonisation goals.
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