In future passengers on a typical domestic return flight, such as Manchester to London, will pay £12 tax each way.
Passengers flying to the US will pay £60 in tax (a 50 per cent increase), while those flying to the Caribbean will pay £75 (an increase of 87.5 per cent). Travellers to Australia or New Zealand will pay £85 in tax (an increase of 112.5 per cent), meaning a family of four flying Down Under face a tax bill of £340.
Sounds about right. London LAX (round trip) is around 2 tonnes CO2, London New York 1.5 tonnes or so.
Social cost of CO2 is, according to Stern, $85 per tonne.
So the Pigou Tax is at least roughly right, in the correct range.
What many seem to miss though is that this is all we have to do. We internalised the externality and that’s it. Problem solved. We don’t have to restrict runways, ration emissions or anything else.