It’s actually cheaper to just force airlines to use green fuel than it is to tax them for their pollution.
April 3, 2026
Original Paper
Turbulence Ahead: Economic Policies for Decarbonizing Aviation
SSRN · 6509400
The Takeaway
Most economists love carbon taxes, but for planes, a simple mandate for sustainable fuel works better. Because it is hard for airlines to switch to anything other than fuel, a tax just makes everything more expensive without actually speeding up the transition.
From the abstract
We study the design of climate policy for hard-to-abate sectors, focusing on global aviation. We build a spatial equilibrium model that links ticket booking data, the global airline network, and climate regulated airlines’ choices in imperfectly competitive air transport markets. We find that sustainable aviation fuel (SAF) quotas out perform carbon pricing, delivering equal emissions cuts at 46–66% of the welfare cost. Ignoring market structure understates the cost of price-based Pigouvian inst