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Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design

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Author Info

  • Jan K. Brueckner

    ()

  • Anming Zhang

    ()
    (Department of Spacial Economics, VU University, Amsterdam)

Abstract

This paper explores the effect of airline emissions charges on airfares, airline service quality, aircraft design features, and network structure, using a detailed and realistic theoretical model of competing duopoly airlines. These impacts are derived by analyzing the effects of an increase in the effective price of fuel, which is the path by which emissions charges will alter airline choices. The results show that emission charges will raise fares, reduce flight frequency, increase load factors, and raise aircraft fuel efficiency, while having no effect on aircraft size. Given that these adjustments occur in response to the treatment of an emissions externality that is currently unaddressed, they represent efficient changes that move society closer to a social optimum.

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File URL: http://www.economics.uci.edu/files/economics/docs/workingpapers/2008-09/brueckner-16.pdf
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Bibliographic Info

Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 080916.

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Length: 32 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:irv:wpaper:080916

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Keywords: Emissions; Global warming; Airlines;

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References

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  1. Douglas, George W & Miller, James C, III, 1974. "Quality Competition, Industry Equilibrium, and Efficiency in the Price-Constrained Airline Market," American Economic Review, American Economic Association, vol. 64(4), pages 657-69, September.
  2. Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
  3. Brueckner, Jan K., 2002. "Network Structure and Airline Scheduling," Working Papers 02-0112, University of Illinois at Urbana-Champaign, College of Business.
  4. Peter Forsyth, 2008. "The Impact of Climate Change Policy on Competition in the Air Transport Industry," OECD/ITF Joint Transport Research Centre Discussion Papers 2008/18, OECD Publishing.
  5. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May.
  6. Brueckner, Jan K. & Girvin, Raquel, 2008. "Airport noise regulation, airline service quality, and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 42(1), pages 19-37, January.
  7. Panzar, John C, 1979. "Equilibrium and Welfare in Unregulated Airline Markets," American Economic Review, American Economic Association, vol. 69(2), pages 92-95, May.
  8. Albers, Sascha & Bühne, Jan-André & Peters, Heiko, 2009. "Will the EU-ETS instigate airline network reconfigurations?," Journal of Air Transport Management, Elsevier, vol. 15(1), pages 1-6.
  9. Tae Hoon Oum & Anming Zhang & Yimin Zhang, 1995. "Airline Network Rivalry," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 836-57, November.
  10. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2000. "A note on the optimality of airline networks," Economics Letters, Elsevier, vol. 69(3), pages 429-434, December.
  11. Scheelhaase, Janina D. & Grimme, Wolfgang G., 2007. "Emissions trading for international aviation—an estimation of the economic impact on selected European airlines," Journal of Air Transport Management, Elsevier, vol. 13(5), pages 253-263.
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Citations

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Cited by:
  1. Sheu, Jiuh-Biing, 2014. "Airline ambidextrous competition under an emissions trading scheme – A reference-dependent behavioral perspective," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 115-145.
  2. Zou, Bo & Hansen, Mark, 2012. "Flight delays, capacity investment and social welfare under air transport supply-demand equilibrium," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 965-980.
  3. Adler, Nicole & Martini, Gianmaria & Volta, Nicola, 2013. "Measuring the environmental efficiency of the global aviation fleet," Transportation Research Part B: Methodological, Elsevier, vol. 53(C), pages 82-100.

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