Evaluating the EU Fit-for-55 Aviation policy package: a case study on Carbon Leakage

Abstract

The Fit-for-55 climate policy package is implemented by the European Union with the goal of lowering carbon emissions in order to counteract global warming. This paper focuses on demand-side interventions in the aviation sector. To study the effects we set up a discrete choice experiment with projected ticket price increases to Greece and compare effects on demand to Turkey which is unaffected by the policies. We estimate price elasticities of demand for leisure travel from Sweden, Germany and France and find that demand is elastic, and that there are significant substitution effects between the two destinations. By employing our estimated elasticities we project how effective the policies are in reducing CO2 emissions in 2035. Our findings suggest that, compared to a nopolicy scenario, the policies will lead to an overall net reduction in aggregated CO2 emissions from our studied countries. While the net reductions amounts to roughly 3.7 percent, there is however substantial carbon leakage,