Optimality of environmental policies in air transport markets and changes in the schedule delay: A theoretical approach

Air transport provides essential services in modern economies, though it produces significant negative external effects on the environment. Air quality, greenhouse gas emissions and noise are the main issues. The current environmental regulatory practice in air transport usually devises policy interventions for each externality in isolation disregarding their impact on the schedule delay, which in turn affects the consumers’ generalized price and social welfare. In this paper we develop a theoretical model that shows that such an approach is inadequate, and may lead to the choice of wrong environmental policies.

► Environmental policies usually focus on one externality at a time, ignoring the effect on the schedule delay.
► The aim of this paper is to highlight the importance of the schedule delay when deciding the optimal environmental policy.
► We show that ignoring the effects on the schedule delay may lead to the choice of wrong policies, reducing the social welfare of the overall economy.