‘Decreasing the Distance’ in the Climate Finance Gap: A Multicriteria Analysis of Policy Options to Generate Carbon Revenues from the International Aviation Sector

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Johns Hopkins University
A significant climate finance gap exists in the shortfall between the climate finance mobilized every year and the climate finance needed, which is estimated to increase to the trillions of dollars over the next few decades. Mobilizing these trillions will require scaling-up existing sources of finance while also raising new, innovative, and additional sources. The international aviation sector offers an interesting opportunity to consider a novel way in which a hard-to-abate industry can generate billions of dollars in carbon revenues every year, without any market distorting effects, to be channeled as a source of climate finance. This creates the possibility of a new climate regime for the international aviation sector that would require the adoption of a policy at the global level. Three potential policy options include: a passenger tax, a jet fuel tax, and an aircraft movement tax, but which of these policies is viable for adoption is the central question of this study. To be viable, such a policy should (i) gain the support of major powers, (ii) be politically feasible, (iii) be able to generate adequate (i.e., substantial) revenues, (iv) be easily implementable, and (v) not create market distortions. A multicriteria analysis was undertaken to assess the policy options and found that a passenger tax would be the most viable for adoption among the three options. A jet fuel tax and aircraft movement tax remain possible alternatives but would pose more challenges to international adoption.
Climate Finance, Climate Change, International Aviation Sector, Multicriteria Analysis, Multi-criteria Analysis