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Aviation and Climate Change: Economic Perspectives on Greenhouse Gas Reduction Policies

Aviation emissions and climate impactsIntroductionAviation CO2: from the emission to global warmingNon-CO2 effects from aviationExample for mitigation options: alternative routingSummaryReferencesRenewable fuels for aviationIntroductionThe need for renewable jet fuelDrop-in capabilityRenewable aviation fuels: technology options and current useHydroprocessed Esters and Fatty Acids (HEFA)Thermochemical pathwaysGasification and Fischer-Tropsch synthesisHydrothermal liquefaction (HTL)Pathways involving fermentationAlcohol-to-Jet (AtJ)Direct microbial conversion to hydrocarbonsRenewable non-biogenic processesPower-to-Liquids (PtL)Solar-thermochemical fuelsCurrent commercial use of renewable jet fuelThe potential of renewable jet fuelSpecific greenhouse gas emissionsProduction potentialEconomic aspectsOutlookNotesReferencesAir transport and the challenge of climate change – how aviation climate change policies workIntroductionEconomic efficiency and climate change mitigation policiesCommand and control policyTaxesEmissions trading schemes (ETSs)The workings of an ETSFree permits or not?The CORSIA schemeInteractions between policies - the waterbed effectSpecific issuesAviation and intermodal competitionIndirect emissionsPass throughAssessing policiesChoosing amongst policies: the political economy dimensionNotesReferencesETSs and aviation: implementation of schemes in the EU and other countriesIntroductionThe rationale of an aviation ETSHow ETSs are applied to aviationWhich greenhouse gases?The inclusion of aviation in the EU ETSBenchmarkingAuctioningThe special reservePenaltiesImplementation: reduced geographical scopeBenchmarksAuctioningThe special reserveProgress of intra-EU schemeImpact on airline costsDistortions and effectsThe impact on airline pricingPrice elasticities of demandOther aviation ETS schemesNew ZealandChina (Shanghai)Summary and conclusionsNotesReferencesInternational action and the role of ICAOThe Kyoto processKyoto process and aviationClimate researchICAOOverviewICAO and environmentICAO and climate change activitiesICAO and a market-based measures systemIATA position and engagementCurrent status and the way forwardThe likelihood of international actionReferencesICAO’s new CORSIA scheme at a glance – a milestone towards greener aviation?IntroductionBackground and genesis of CORSIAEmergence and design of the EU ETS for aviationDesign and functioning of CORSIAExpected impacts and limitationsConclusionNotesReferencesVoluntary carbon offset schemes in the airline industry: why did they fail?IntroductionAviation and climate changePolicies to mitigate the climate change impact of air transport: some efficiency considerationsEfficiency criteria for climate policyGHG reduction instruments: survey and brief assessmentSupply side measuresDemand side measuresAssessment of voluntary carbon offset schemesExcursus: key terms2An overview of the carbon marketThe regulated carbon market under the Kyoto ProtocolThe voluntary carbon offset marketVoluntary carbon offset schemes in practiceMain providersFunctioningCritical assessmentConclusionNotesReferencesRoadmap to decarbonising aviationIntroductionThe contextCan aviation be decarbonised?Regulating at what level?European effortsEurope’s decarbonisation strategyT&E decarbonisation pathwayMeasures to cut fuel demandBusiness as usualDesign and operational efficiencyPricing aviation and eliminating subsidiesOptions for carbon pricingOther options for taxing aviationModal shiftDecarbonising aviation fuelsAdvanced biofuelsSynthetic e-fuelsSafeguardsAdvanced sustainable biofuelsElectrofuelsCurrent limits to fuel blendingAchieving fuel switchingA new dedicated EU policy for alternative fuels in aviationGHG - low carbon fuel standard for aviationDecarbonising aviation resultsAviation’s non-CO2 effectsPolicyConclusionsAppendix A Calculations and inputsAppendix В ElasticitiesPrice elasticitiesIncome elasticitiesAccounting for price and income elasticitiesEvolution of aviation segments projectionsAppendix C Sensitivity analysisReferencesIntermodal dimension of climate change policyRisk of climate change and challenges for transportationClimate impacts and contribution of different transport modesMarket interventions by taxation, emission trading and subsidizationTaxation and emission tradingSubsidization of operation, infrastructure provision and manufacturingAviationRailwaysModal comparison of subsidizationPotential of modal shift in long-distance transportHSR network expansion: limits to growthPlanned HSR network in SpainOther examples for risks of over-investment in HSRChecks for sustainability of airport and HSR investmentsIntegrated planning and assessmentLife-cycle analysis including wider economic impactsOpportunity calculusConclusionsNotesReferencesScenarios for future policies – potential costs and competitive impacts of different market-based measures for the limitation of all climate relevant species from aviationIntroductionAviClim methodological approachSelected economic resultsCosts for the aviation sector under the market-based measureCosts and competitive impacts for airline groups under the market-based measureAirline groups investigatedMethodological approach for modelling the cost impacts of the market-based measures under considerationResults for different airline groupsConclusions and recommendationsReferencesInclusion of international aviation emissions under the Paris Agreement’s Nationally Determined Contributions (NDCs)OverviewParis Agreement wording on international transport emissionsExamination of NDCs and action taken to dateAttribution of emissionsWhat role for IMO and ICAOLevel of ambition resulting from inclusion in NDCsConclusion and recommendationsNoteReferencesReview and further directionsIntroductionThe road aheadBy how much should air transport reduce its emissions?Setting out the (air transport) emissions problemThe tax and policy environmentLow demand elasticities and high costs of emissions reduction: does including air transport matter?The implications of the wider economic benefits of air transportMinimising cost and maximising effectivenessAre policies complementary or redundant (the inaterbed effect)?Targeted or direct policiesTradability — is trade always desirable?Taxes, subsidies and constraints - implications for the dead weight lossesBroader aspects - handling non-CO2 emissions and incidenceBeyond CO2 - policies to reduce other greenhouse gasesWho pays? Determining the incidenceThe political economy of emissions reduction in air transportImpacts on airline competitivenessReducing emissions from air transportProgress so farWhich policies are best? A menu of policy optionsPrioritiesNotesReferences

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