Differential carbon tax policy in aviation: One stone that kills two birds?

Abstract

In the aviation sector, environmental schemes such as carbon taxes have been proposed but not successfully implemented. Extant literature sufficiently examines various aviation networks for environmental-efficiency but is scarce with regard to ensuring their implementation. Based on this motivation, this study not only deliberates on “what” constitutes a sustainable aviation network but also addresses “how” it can be realized. This article proposes differential carbon tax policy in the form of an inverse optimization-based mechanism that governs the behavior of airline carriers such that they operate on routes that constitute a sustainable aviation network. This article also explores the positive externality of the proposed mechanism to enhance societal development by incentivizing airlines to render their services at remote locations. Therefore, unlike extant literature that explores the normative aspects of plausible sustainable aviation networks, this article proposes an implementation framework to realize the desired aviation network. It delineates policy directives in the form of differential carbon taxes to tweak the selection of routes by the airline carriers. The proposed carbon tax policy not only makes the airline carriers accountable for the carbon emissions but also steers them in the direction of constituting the desired aviation network defined as per the goals of policymakers. The differential carbon tax policy can be used to ensure the realization of an aviation network directed towards environmental efficiency (or) social development. The proposed aviation policy framework is multi-faceted and addresses the twin pillars of environmental and social sustainability.