Tourism impacts in South-East Asia from aviation carbon pricing

This paper details the construction of a simple model that estimates tourism income impacts for selected Asia-Pacific Economic Cooperation (APEC) member economies of future market-based measures to reduce international aviation emissions. The model was commissioned by the APEC Transport and Tourism Working Groups in order to inform sustainable policy approaches to international aviation emissions. At its heart, the model uses price elasticities which capture variations between demand responses for visitors from different regions. To make the model operational, we explore key intermediate relationships between emissions pricing and international tourism income. For example, an examination of the nature, magnitude and importance of international aviation movements shows a diversity of aviation flows and levels of dependence on tourism income across sample economies. Furthermore, the relationship between unit passenger costs of aviation, fuel prices and distance flown is found to be complex, with fuel costs per passenger increasing more rapidly than operating costs as distance increases. Model results suggest that - within sample economies - proposed pricing measures are likely to reduce international aviation demand reductions by a maximum of 5%, while national income is expected to decline by a maximum 0.5% as a result.