Tag: externalities

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A Tory tax on air travel – flying a kite?

In a surprise move, the Tories have announced plans to tax air travel as part of their environmental policy. It was no surprise to hear the airlines criticise this, but disquiet about this policy has been expressed in traditional Tory circles and it amounts to a significant departure from the past for the party. Are they just flying a kite, or is this a serious policy initiative?

Tories reveal plans for green tax hike on air travel Guardian (11/3/07)
Tory plan for sky-high flight taxes Scotsman (11/3/07)
Airlines shoot down Tory ‘tax on fun’ Telegraph (12/3/07)
Green tax won’t help the planet or the Tories Telegraph (11/3/07)
Tories plan green tax on flights BBC News Online (11/3/07)

Questions

1. Why might a free market in air travel not result in an optimal number of flights.
2. Discuss the likely effectiveness of the tax on flying for reducing the demand for air travel. (You should consider the likely value of the price elasticity of demand in your answer.)
3. With the use of appropriate diagrams, assess the likely impact of the tax on flying on the equilibrium level of price and output in the market for air travel.
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African roses – red or green?

Did you buy red roses for Valentine’s Day? If so – where did they come from? Africa or Europe? You may have taken a conscious environmental decision to buy from European sources as the flowers do not have to travel so far and therefore involve fewer air miles, but according to International Development Secretary, Hilary Benn, this may be mistaken and it may be ‘greener’ to buy red from Africa.

Buy African flowers – UK Minister BBC News Online (13/2/07)
Buy African flowers for Valentine’s Day, minister says Guardian (13/2/07)

Questions

1. Compare and contrast the social costs and social benefits (including both private and external costs) of buying red roses produced in Europe and those produced in Africa.
2. Assess which are the most environmentally beneficial presents to give on Valentine’s Day. Give reasons to justify your answer.
3. Evaluate two policy options available to the government to reduce the environmental impact of Valentine’s Day.