Internalisation of emissions costs from Swedish aviation
This thesis examines the emissions costs of Swedish aviation and their degree of internalisation under current
economic instruments. The results show that the degree of internalisation spans from practically zero for a
long-haul flight to 6 per cent for a typical domestic flight, where the climate cost, including high-altitude
impact, makes up the main part of the cost. To inform evaluation of the consequences of this underinternalisation,
or attempts to correct for it using price instruments, the price and income elasticities of
international leisure air travel from Sweden are estimated using household expenditure data and two different
price measures. The resulting elasticities are very high ? 2.03 or 2.04 for the income elasticity and -2.53 or
-1.88 for the price elasticity ? and should be interpreted cautiously due to data limitations, especially for the
price elasticities. However, even a cautious interpretation seems to support other authors? findings that
demand for leisure air travel is price and income elastic. This means that pricing the uninternalised costs
would have a clear effect on demand and hence on emissions, without undesired distributional effects. The
thesis concludes with a discussion of how such price instruments could be designed.