In July, the UK Department for Transport published a consultation on its strategy for achieving net zero carbon emissions in the aviation sector by 2050. While the consultation discusses the technological challenges with achieving net zero, it does not consider the impact of its net zero measures on market outcomes, such as fares, competition and effects on airlines with different business models.
In our response to the DfT’s consultation, we have set out a methodology to better understand these market outcomes. Applying this methodology to an illustrative set of routes, we found that the impact of carbon abatement on fares may be significant. For example, low-cost carriers with lower base fares may be harder hit, while long-haul routes with significant emissions could see a large fare increase. In the future, therefore, competition between airlines may depend on whether they can reduce carbon emissions in a cost-effective way.