Economics should be open

November 26, 2008

15% reduction in trans-Atlantic aviation from carbon costs

Filed under: Carbon Trading — Tags: , , , , — howardchong @ 11:49 pm

So, the European carbon cap-and-trade system (ETS, European Trading Scheme) is strongly moving towards forcing all flights into and out of the EU  to participate; i.e. buy carbon credits. It doesn’t matter if they get allocated them for free, because this opportunity cost will be passed on. See 

What affect would this have on transatlantic travel?

Here’s a back of the envelope calculation that says this will decrease the number of flights across the atlantic by roughly 15%.  A round-trip from Boston Logan to London Heathrow is 3.2 Tons of CO2 (when including Radiative forcing, using the calaulator at Assume a carbon price of about $30/ton (rough estimate of prices, source: ECX).  That’s about a $90 price increase. Assume a $900 price on travel (Orbitz). That’s a 10% price increase. If you assume a price elasticity of 1.5, you get the conclusion of a 15% reduction in transatlantic airline travel.

I make no judgment whether this is a good or bad thing. I like cheap travel. But I also like the environment. The main principle is that if we’re going to force power plants to pay for carbon costs, then everyone should pay. There are no sacred cows that I think should be exempted.

The only other comment is that I think there are considerable loopholes that need to be addressed in implementing this policy. Does a non-stop from SF to Paris get charged for the full distance but a 1-stop with a stop in Boston get charged just for the Atlantic portion? What about 1-stops to Iceland? (This might be the perfect plan to bail out Iceland).

The other thing is that this means that airlines will need to cut back capacity by about 15%. This isn’t hard to do, they already react to changing fuel prices. But if they know this is down the line, this would be a reason to delay heavy investment in more planes.



October 31, 2008

CITL, coverage for the ETS, matching to EPER

Filed under: Carbon Trading, Data Insights, Open Source — Tags: , , , , , — howardchong @ 9:53 pm

This post is a big deal for me because it really pushes me to stay true to open source principles.

So, here’s the deal.
The ETS is the Emissions Trading Scheme, a cap and trade carbon program in Europe.
The CITL is the Community Independent Transaction Log for the ETS.
The EPER is European Pollution Emissions Register ( which is a European version of the Toxics Release Inventory in the US, only much better in that it covers more emissions (including CO2).

And, my current project is this 50 hour effort to match records in the CITL to records in the EPER.

What’s the big deal? Well, I’m getting insight into what companies were excluded from the ETS, something that may or may not be well highlighted in the national allocation plans. For all the mandarins running the ETS, could it be that they failed to ensure that countries included all units that should be under the ETS in the ETS? It gets to the question of whether allowances were too high (somewhat, my own sense is that economic activity and weather had something to do with the “over-allocation”).

So, here’s the deal. There’s plenty I want to do with this data and I think there is a small time window to do it. So, if you want to work on this project with my matched database, please write me.

As academia is all about getting credit for what you do, we’d have to talk carefully about credit, etc. But my prior is that any work done would be collaborative and everyone gets to share credit.

If you are a private firm doing proprietary market research (i.e., you wouldn’t want what you do with the data to be public), ask me what info you need, and I’ll probably give it to you, perhaps for a fee or some other trade. This information has a full list of contact information for EUA permit holders.

I’m already telling you too much by telling you that there’s something interesting in the EPER-CITL data matching, but that’s the risk I’m taking. Partly because I think it is more important that good research be done and get out there than that I get total credit.

You comments are deeply appreciated.

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