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Incentive-based regulation of CO2 emissions from international aviation

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  • Carlsson, Fredrik
  • Hammar, Henrik

Abstract

We explore the possibilities of using incentive-based environmental regulations of CO2 emissions from international civil aviation. In theory incentive-based instruments such as an emission charge or a tradable emission permit system are better regulations than so-called command-and-control regulations such as emission limits or technology standards. However, the implementation of these instruments is a complex issue. We therefore describe and discuss how an emission charge and a tradable emission permit system for international aviation should be designed in order to improve efficiency. We also compare these two types of regulations. In brief, we find that an emission charge and a tradable emission permit system in which the permits are auctioned have more or less the same characteristics. The main advantage of a tradable emission permit system is that the effect, in terms of emission reductions, is known. On the other hand, we show that under uncertainty an emission charge is preferred. The choice of regulation is a political decision and it does not seem likely that an environmental charge or a tradable emission permit system would be implemented without consideration of the costs of the regulation. Revenue-neutral charges or gratis distribution of permits would, for this reason, be realistic choices of regulations. However, such actions are likely to result in less stringent regulations and other negative welfare effects.

Suggested Citation

  • Carlsson, Fredrik & Hammar, Henrik, 2002. "Incentive-based regulation of CO2 emissions from international aviation," Journal of Air Transport Management, Elsevier, vol. 8(6), pages 365-372.
    • Handle: RePEc:eee:jaitra:v:8:y:2002:i:6:p:365-372
    DOI: 10.1016/S0969-6997(02)00011-X
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    6. Lucas M Z Mendes & Georgina Santos, 2008. "Using Economic Instruments to Address Emissions from Air Transport in the European Union," Environment and Planning A, , vol. 40(1), pages 189-209, January.
    7. Cui, Qiang & Li, Ye & Lin, Jing-ling, 2018. "Pollution abatement costs change decomposition for airlines: An analysis from a dynamic perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 96-107.
    8. Cohen, Maurie J., 2010. "Destination unknown: Pursuing sustainable mobility in the face of rival societal aspirations," Research Policy, Elsevier, vol. 39(4), pages 459-470, May.
    9. Ya Chen & Xiaoli Fan & Qian Zhou, 2020. "An Inverted-U Impact of Environmental Regulations on Carbon Emissions in China’s Iron and Steel Industry: Mechanisms of Synergy and Innovation Effects," Sustainability, MDPI, vol. 12(3), pages 1-19, February.
    10. Xu, Meng & Grant-Muller, Susan, 2016. "Trip mode and travel pattern impacts of a Tradable Credits Scheme: A case study of Beijing," Transport Policy, Elsevier, vol. 47(C), pages 72-83.
    11. Zhou, Wenji & Wang, Tao & Yu, Yadong & Chen, Dingjiang & Zhu, Bing, 2016. "Scenario analysis of CO2 emissions from China’s civil aviation industry through 2030," Applied Energy, Elsevier, vol. 175(C), pages 100-108.
    12. Chin, Anthony T.H. & Zhang, Peng, 2013. "Carbon emission allocation methods for the aviation sector," Journal of Air Transport Management, Elsevier, vol. 28(C), pages 70-76.
    13. Brown, Richard S., 2016. "Lobbying, political connectedness and financial performance in the air transportation industry," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 61-69.
    14. Vespermann, Jan & Wald, Andreas, 2011. "Much Ado about Nothing? – An analysis of economic impacts and ecologic effects of the EU-emission trading scheme in the aviation industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1066-1076.
    15. Yu, Jinglei & Shao, Chaofeng & Xue, Chenyang & Hu, Huaqing, 2020. "China's aircraft-related CO2 emissions: Decomposition analysis, decoupling status, and future trends," Energy Policy, Elsevier, vol. 138(C).

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