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Reducing Airline Emissions: The Future is the Past
Subject Taxes on fuel
Topic Economics and the Environment
Key Words Emissions, environment, fuel-efficiency, costs, pollution, incentives, taxes, fees, prices
News Story

It is estimated that commercial jets account for 3.5 percent of man-made carbon dioxide emissions. Part of the problem is that long-haul aircraft burn a lot of fuel in the first few hours of flight because they are carrying a heavy load of fuel.

"Greener by Design", a research project commissioned by British Airways, Airbus, Boeing, and British airports and government departments, was established to figure how to reduce the impact on the environment and climate change of air travel. Its recommendation is that long-haul flights be replaced with short hops of no more than 4,700 miles. Less fuel would need to be carried, so less fuel would be needed to fly the plane, and emissions would decrease. For example, a direct 9,000-mile flight requires 120 tons of fuel, but three 3,000-mile segments would require only 84 tons. Each ton of fuel saved reduces carbon dioxide emissions by 3.15 tons. The routes would be more like those of yesteryear when planes had less range.

It would be more fuel-efficient if segments were no more than 2,500 miles. However, this would force airlines to fly longer routes to find suitable airports, so overall it would not be worthwhile. The report recognizes that there will need to be incentives for airlines to comply, such as a tax on fuel, or a deadline for increased fuel efficiency.

The airlines do not favor this approach. Airports are already congested. Additional runways would be needed. Airport pollution would increase. Accidents, which mainly happen on take-off and landing, would increase. Crew costs and landing fees would rise, increasing ticket prices. Passengers would not like the increase in journey time. Therefore, instead, the airlines favor reducing air traffic control delays.

(Updated April 1, 2002)

Questions
1. Draw a supply and demand diagram of the market for airline fuel. Show the free-market equilibrium price and quantity.
a) Show the effect of a unit tax on fuel. Which curve moves and why? What happens to the equilibrium price and quantity of airline fuel?
b) Explain why airlines might be induced to switch from long-haul to multiple short-haul segments.
c) What other responses might be seen?
2. Now draw a supply and demand diagram of the market for airline travel. Mark the initial equilibrium price and quantity.
a) Draw the effect of the change in fuel prices you established in 1(a). What happens to the equilibrium price and quantity of air travel?
b) How will this help educe emissions from aircraft?
3. Draw another diagram of the market for airline fuel, showing the initial equilibrium. The airlines would like to see a reduction in air traffic control delays.
a) Show how this would reduce airline fuel consumption.
b) Explain why this is preferable for airlines and their customers.
Source Ben Webster, "Long-Haul Flights On Way Back To Earth," The Times, January 17, 2002.

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