Aligning the Aviation Industry with Global Climate Goals: The Role of Pricing Mechanisms

Despite ongoing national and international policy efforts, carbon emissions from the aviation sector continue to rise. Among the policies implemented, instruments that place a price on emissions—such as carbon markets, airport charges, and ticket taxes—are often considered cost-effective tools because of the flexibility they offer. Drawing on empirical studies that employ causal identification strategies, this article reviews the evidence on the effectiveness of these instruments in curbing aviation emissions. The literature finds that pricing policies reduce emissions primarily by reducing the number of flights, though not necessarily reducing load factors, and by accelerating fleet renewal. Although concerns persist that carbon pricing will shift emissions to activities not subject to these instruments, the evidence suggests that such carbon leakage has been limited so far, aside from potential route shifting via hub changes or delayed aircraft upgrades on routes not facing carbon pricing. Importantly, most of the evidence to date comes from periods of relatively low carbon prices. This review synthesizes the main findings and reflects on their policy relevance for the aviation sector.