Climate change is a poor excuse for blocking airport expansion

Climate change is a poor excuse for blocking airport expansion

There are two standard arguments against airport expansion, whether at Heathrow or elsewhere:

1.    It would lead to increased noise levels for local residents, and perhaps other forms of disruption.

2.    It would fuel air travel, and thereby lead to an increase in carbon emissions.

In economic terms, the first point refers to local externalities, and the second to global ones. The former is a fair argument. Aircraft noise is real, and residents do not have a duty to put up with it unconditionally for the sake of other people’s desire to travel. Ideally, this problem would be solved through some kind of compensation mechanism, where airport operators have to buy the right to raise noise levels from local residents. This would direct airport activity to the places where people mind it least, or value the compensation payments most.

The second point is a bit more curious. Of course it can be argued that carbon emissions represent a negative externality. But this does not provide a case for constraining airport capacity. It provides at best a case for a Pigouvian tax on these emissions, or alternatively, for a cap-and-trade system with tradable carbon permits.

Blocking airport expansion basically means limiting air travel by restricting one of its input factors, which is a strange way of dealing with externalities. When a factory emits noxious fumes, the way to deal with it is to levy a tax on that noxious substance – not to prevent the company from erecting a new factory building. When alcohol consumption leads to additional treatment costs in a tax-funded healthcare system, the way to deal with it is to introduce an alcohol duty – not to prevent breweries from installing new brewing coppers. And when airplanes emit CO2, the way to deal with it is to levy a carbon tax on them – not to prevent the building of new runways. Blocking airport expansions in order to deal with climate change is no more logical than imposing a cap on the number of airplanes that can be build, or on the number of pilots that can be trained.

So why don’t environmentalists campaign for a more logical measure, like some variant of a Pigouvian tax? The answer is simple: Because such a measure already exists, and it is more than sufficient to pay for any negative externalities caused by aviation. The Mirrlees review compares the rates of Air Passenger Duty (APD) to available estimates of the social cost of carbon, and concludes:

‘In summary, these studies all seem to suggest external costs that are, if anything, lower than current APD rates.’

In other words, air travellers already pay their way, and probably beyond. The issue of negative externalities has been solved. Climate change should no longer be an issue in the debate about airport expansion.

Before 2007, which saw a doubling of APD rates, environmentalists probably had a point in arguing that airlines were dumping environmental costs on others. When an economic activity causes an external cost which is not fully internalised through the tax system, the mainstream economist and the environmentalist-cum-anti-consumerist can briefly become fellow travellers. But the former only wants to make polluters pay, nothing more and nothing less. The latter, though, has a much broader set of objectives. Of course they want to internalise externalities, but they also want the state to clamp down consumption habits they consider trashy and tasteless. Therefore, the former has a clearly identifiable final destination, while the latter’s journey is open-ended.

That is one of the dangers of proxy warfare. What serves as a good proxy today may no longer be a proxy tomorrow.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).