The Impact of Climate Change Policy on Competition in the Air Transport Industry

This paper, from a monograph about competitive interaction between airports, airlines, and high-speed rail, examines the potential impact of climate change policy on competition, prices and profitability in the air transport industry. The author first outlines the climate change policies that have been suggested, focusing on the inclusion of air transport in an emissions trading scheme (ETS).This is likely to prove an important policy direction, with the EU, Australia and New Zealand all planning to include air transport in their emission trading schemes. The author examines the possibilities of airlines reducing their emissions intensity in both the short run and long term. The next section discusses the application of the emissions trading schemes of the EU, Australia and New Zealand to air transport, including the possible impacts on air fares are assessed. The author analyzes the impacts of climate change policies, such as carbon taxes or requirements to purchase emissions permits, on airline competition, prices, and profitability. The author finds that the impact varies according to market structure, i.e., whether airline city pair markets are competitive, monopolistic or oligopolistic. Another component is the time scale; airlines are unlikely to be able to pass on the full cost of their permits to their passengers in the short run. However, in the long run, airlines may exit from some city pairs, and this will enable the remaining airlines to raise their fares and restore their profitability. The author concludes that the introduction of a carbon tax or ETS could have implications for competition on international markets. These policies could affect the competitive balance between international airlines, although the author predicts that these potential effects are not likely to be large.

Language

  • English

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 95-127
  • Monograph Title: Competitive Interaction Between Airports, Airlines and High-Speed Rail

Subject/Index Terms

Filing Info

  • Accession Number: 01146682
  • Record Type: Publication
  • ISBN: 9789282102459
  • Files: TRIS
  • Created Date: Dec 15 2009 6:41AM