“Pollution and congestion in airline networks: The role of emission charges” (joint with Xavier Fageda and Katrin Oesingmann)
|
|
Abstract: This paper studies the two main externalities in air transportation, pollution and congestion, which are usually analyzed separately despite being strongly interconnected. We first develop a theoretical model in which airlines generate both externalities, showing that flight frequencies link the two. The model demonstrates that emission charges, unlike the largely theoretical congestion tolls, can act as a practical price-based mechanism that mitigates both pollution and congestion, while also incentivizing fleet renewal. We then test these predictions empirically by exploiting the EU Emissions Trading System (EU ETS) as an exogenous source of variation in emission charges. Using data on one-stop intercontinental routings from Europe, combined with congestion and alliance measures, we find that higher emission charges reduce frequencies, encourage the use of newer aircraft, and alleviate congestion. Moreover, we document a negative effect of alliances on frequencies and emissions, consistent with internalization among partner airlines. These results confirm that emission charges can function as an effective and comprehensive policy instrument, internalizing congestion in practice where tolls have failed.
|