“A convenient truth”: air travel passengers’ willingness to pay to offset their CO2 emissions

Several economic reviews demonstrate the substantial costs related to climate change and consequently call for early action. These reviews, however, have been limited to measuring ‘objective’ risks and expected material damage related to climate change. The ‘subjective’ perceived risk of climate change and society’s willingness to pay (WTP) to avoid these risks are expected to provide an important additional motivation for direct action. We investigate whether and why air travel passengers—an increasingly important source of greenhouse gas emissions—are supportive of measures that increase the cost of their travel based on the polluter pays principle and compensate the damage caused by their flight. Compared to the results of the few previous studies that have elicited WTP estimates for climate policy more generally, our results appear to be at the lower end of the scale, while a comparison to estimates of the social cost of carbon shows that the average WTP estimate in this study is close to the estimated marginal damage cost. Although significant differences are found between travellers from Europe, North America, Asia and the rest of the world, we show that there exists a substantial demand for climate change mitigation action. The positive risk premium over and above the expected property damage cost assessments should be accounted for more explicitly in economic reviews as it will add to the burden of proof of direct action. Measurements of passenger WTP will help policy makers to design effective financial instruments aimed at discouraging climate-unfriendly travel activities as well as to generate funds for the measures directed at climate change mitigation and adaptation. Based on stated WTP by travellers to offset their greenhouse gas emissions, funds in the order of magnitude of €23 billion could be generated annually to finance climate change mitigation activities.

[1]  Richard N. Cooper,et al.  and Developing Countries , 1993 .

[2]  Robert Cameron Mitchell,et al.  Using Surveys to Value Public Goods: The Contingent Valuation Method , 1989 .

[3]  R. Tibshirani,et al.  An introduction to the bootstrap , 1993 .

[4]  Trudy Ann Cameron,et al.  Individual Option Prices for Climate Change Mitigation , 2002 .

[5]  D. Pearce,et al.  Appraising Flood Control Investments in the UK , 2005 .

[6]  P. Schmidt,et al.  Limited-Dependent and Qualitative Variables in Econometrics. , 1984 .

[7]  Roy Brouwer,et al.  Environmental value transfer: state of the art and future prospects , 2000 .

[8]  Timothy O'Riordan,et al.  Valuing Environmental Goods: An Assessment of the Contingent Valuation Method , 1987 .

[9]  Richard S. J. Tol,et al.  The Marginal Costs of Greenhouse Gas Emissions , 1999 .

[10]  Tora Skodvin.  Science-policy interaction in the global greenhouse: Institutional design and institutional performance in the Intergovernmental Panel on Climate Change (IPCC) , 1999 .

[11]  Xander Olsthoorn,et al.  Carbon dioxide emissions from international aviation: 1950–2050 , 2001 .

[12]  P. Slovic.  Perception of risk. , 1987, Science.

[13]  A. Gore.  An Inconvenient Truth: The Planetary Emergency of Global Warming and What We Can Do About It , 2006 .

[14]  Carol L. Silva,et al.  Exploring the Beta Model Using Proportional Budget Information in a Contingent Valuation Study , 2005 .

[15]  W. Michael Hanemann,et al.  THE STATISTICAL ANALYSIS OF DISCRETE-RESPONSE CV DATA , 1996 .

[16]  W. Michael Hanemann,et al.  Statistical Efficiency of Double-Bounded Dichotomous Choice Contingent Valuation , 1991 .

[17]  C. Brooks.  Climatic Change , 1913, Nature.

[18]  S. Chilton,et al.  Contingent Valuation and Social Choices Concerning Public Goods : An Overview of Theory, Methods and Issues , 2007 .

[19]  Ian J. Bateman,et al.  Valuing Environmental Preferences: Theory and Practice of the Contingent Valuation Method in the US, EU, and developing Countries , 2001 .

[20]  W. Kip Viscusi,et al.  The Generational Divide in Support for Environmental Policies: European Evidence , 2005 .

[21]  Erik Schokkaert,et al.  Identifying the warm glow effect in contingent valuation , 2003 .

[22]  T. Cameron,et al.  Updating Subjective Risks in the Presence of Conflicting Information: An Application to Climate Change , 2002 .

[23]  Timothy C. Haab,et al.  Referendum Models and Negative Willingness to Pay: Alternative Solutions , 1997 .

[24]  Kenneth J. Arrow,et al.  Global Climate Change: A Challenge to Policy , 2007 .

[25]  Daniel Kahneman,et al.  Valuing public goods: The purchase of moral satisfaction , 1992 .

[26]  Anna Alberini,et al.  Efficiency vs Bias of Willingness-to-Pay Estimates: Bivariate and Interval-Data Models , 1995 .

[27]  D. Pearce.  The Social Cost of Carbon and its Policy Implications , 2003 .

[28]  Sebastian Oberthür.  Institutional interaction to address greenhouse gas emissions from international transport: ICAO, IMO and the Kyoto Protocol , 2003 .

[29]  Richard A. Levine,et al.  How Much Does the Far Future Matter? A Hierarchical Bayesian Analysis of the Public's Willingness to Mitigate Ecological Impacts of Climate Change , 2003 .

[30]  N. Stern.  The Economics of Climate Change: Implications of Climate Change for Development , 2007 .

[31]  Sally Cairns,et al.  Predict and decide - aviation, climate change and UK policy , 2006 .

[32]  N. Stern.  What is the Economics of Climate Change , 2006 .

[33]  T. Earle,et al.  Environmental Hazards and the Public , 1992 .

[34]  H Roberts,et al.  Risk Society: Towards a New Modernity , 1994 .

[35]  N. Hanley,et al.  A ‘Natural Experiment’ Approach to Contingent Valuation of Private and Public UV Health Risk Reduction Strategies in Low and High Risk Countries , 2005 .

[36]  K. Atkinson,et al.  AERO2k Global Aviation Emissions Inventories for 2002 and 2025 , 2004 .

[37]  I. Bateman.  Economic valuation with stated preference techniques : a manual : department for transport , 2002 .

[38]  David F. Layton,et al.  Heterogeneous Preferences Regarding Global Climate Change , 2000, Review of Economics and Statistics.

[39]  Robert P. Berrens,et al.  Would developing country commitments affect US households' support for a modified Kyoto Protocol? , 2004 .

[40]  Michael Jones-Lee,et al.  The Economics Of Safety And Physical Risk , 1991 .

[41]  R. Zeckhauser,et al.  The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend , 2005 .

[42]  M. Cipollina,et al.  EU and developing countries : what is the impact of agricultural preferences ? , 2008 .

[43]  J. Penner,et al.  Aviation and the Global Atmosphere , 1999 .

[44]  G. Maddala.  Limited-dependent and qualitative variables in econometrics: Introduction , 1983 .