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The Impact of Aviation Fuel Tax on Fuel Consumption and Carbon Emissions: The Case of the US Airline Industry

In: Aviation Policies

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  • Hideki Fukui

    (Ehime University)

Abstract

This chapter examines the effect of an increase in aviation fuel tax on the reduction of fuel consumption and carbon emissions using data from the US airline industry. The results of simultaneous quantile regression using unbalanced panel data on US carriers from 1995 to 2013 suggest that the short-run price elasticities of jet fuel consumption are negative and statistically significant for all quantiles, ranging from -0.350 to -0.166. The long-run price elasticities show a similar pattern, ranging from -0.346 to -0.166, though they are statistically significant only for the 0.1, 0.2, 0.3, and 0.5 quantiles. The results suggest that the magnitude of the reduction in fuel consumption and CO2 emissions would be smaller in the longer term. Our calculation, using 2012 values, suggests that an increase in aviation fuel tax of 4.3 cents—the highest during the analysis period—would reduce CO2 emissions in the US by approximately 0.14–0.18% in the short run (one year after the tax increase). However, possibly due to the rebound effect, this percentage reduction would decline to approximately 0.008–0.01% in the long run (three years after the tax increase).

Suggested Citation

  • Hideki Fukui, 2025. "The Impact of Aviation Fuel Tax on Fuel Consumption and Carbon Emissions: The Case of the US Airline Industry," Springer Books, in: Aviation Policies, chapter 0, pages 207-243, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-7303-2_6
    DOI: 10.1007/978-981-96-7303-2_6
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