ABSTRACT
This chapter discusses the instruments of relevance from an economic perspective and pays particular attention to mechanisms which are used, or are proposed, for air transport. It provides a framework for economic efficiency and climate change mitigation policy, focusing on the static efficiency of measures to control greenhouse gases by prices or quantities. Environmental measures are usually classified into two broad categories – command and control policies on the one hand, and economic instruments, including taxes and emission trading schemes, on the other. Taxes on air transport services primarily have an effect on overall demand, and the effect on fuel consumption and emissions is due only to a smaller number of movements. One of the most discussed and controversial policies being currently implemented around the world is the emission trading scheme (ETS), particularly the European ETS. Aviation produces emissions directly but also indirectly, through its use of other goods and services such as electricity.
