Building a baseline to better integrate air passenger and air freight transport into a global Computable General Equilibrium (CGE) model

Abstract

The Covid-19 pandemic has had opposite effects on demand for air passenger and air cargo transport and on the way these two sectors interact with other sectors of the economy. However, macroeconomic models generally represent aviation as a single sector, limiting the ability to assess those interactions. In this study, we split the air transport sector into two sectors (passenger and freight) in GTAP’s Multiregional Input–Output table. We assess the sectors’ response to a carbon tax by performing a sensitivity analysis. Our results highlight the environmental benefits from the Covid-19 pandemic will only be transitory unless policies and consumer demand rein in traffic growth in the aviation industry. Particular attention should be paid on leisure travel, due to its large share in the aviation industry and the potential steep rise in demand (87%) in the EU27 projected between 2015 and 2030.