Estimating Willingness to Pay Air Passenger Duty

Abstract

Carbon taxation on air travellers is widely considered an effective way of offsetting environmental externalities and adjusting tourist flow. Despite the popularity of carbon taxation, research investigating travellers’ willingness to pay (WTP) such taxes remains scant. Using the air passenger duty (APD) levied by the UK government, this study estimates UK outbound travellers’ WTP and further derives the demand curves under six trip scenarios. The contingent valuation method is used to elicit the travellers’ WTP based on an online questionnaire survey. Comparative analysis and hierarchical linear modelling reveal that first, travellers are willing to pay more APD for business class and long-haul trips, and second, all of the demand curves are downward sloping with increasing elasticities.