Estimating the effects of price-based environmental policies on aviation emissions at neighboring airports

Given their distinct service and demand characteristics, flight operations at different airports and the resulting emissions are not expected to be uniformly impacted by price-based environmental policies such as carbon offset charges, carbon taxes and carbon credits. In order to understand the variabilities, we explore the relationship among airfare (a proxy for price-based policies), passenger demand, airline capacity decisions, and resulting aviation emissions on several air routes originating from a small and a large airport in the US Midwest. Using a supply-and-demand model, emissions are found to be inelastic to airfare overall, although they appear to respond to airfare tenfold more at the small airport compared to the large one. This inelasticity suggests that price-based measures will have low efficacy towards directly reducing aviation emissions, despite their role in generating financial resources for supporting various carbon removal and reduction technologies and processes. Given that the studied airports are only about a 2-h drive apart, the aforementioned emissions' response variability show that studying and designing price-based policy instruments at national, continental and global scales, as done extensively thus far, may mask significant regional variations. Replicating this more localized approach on airports in different regions of the US as well as other countries may yield a range of insights about where pricebased environmental policies could have efficacy and to what extent.