This study focuses on carbon dioxide emissions from aircraft engines, which have both local and climate change implications, and where the emphasis of most recent discussions has centred. The EU has set limits on local air quality that affects emission levels around airports, especially from nitrogen oxides. At the local level, a few airports have introduced emissions charges, and local air quality has become an important issue in airport expansion planning applications. The policy options for air transport include rationing the number of flights operated (but this is almost impossible to administer fairly at an international level), setting stricter standards fro new aircraft and engines, replacing fossil fuels with biofuels, or voluntary emission reduction targets but none of these options use market mechanisms. Capping emissions at a certain level and allowing entities to buy and sell emissions permits according to whether they are above or below the cap is investigated compared with the alternative of a fuel or emissions tax. An emissions trading system is considered likely in Europe by 2012 for carbon dioxide. The mechanisms by which this scheme might operate and its effects on competing airlines are outlined. The costs incurred by airlines as a result of the scheme can either be absorbed in reduced profits, passed on to the consumer as higher fares or a combination of the two,with the assumption made that the increased costs would be passed on to the consumer unless competition at a particular airport was fierce. The increased cost to the consumer would be lower than recent fuel tax surcharges so it is considered likely to have only a limited effect on air traffic growth. For the covering abstract see ITRD E146823
Abstract