Aviation tax and railway subsidy: An integrated policy

In this paper, we build a simple model to investigate the impacts of using aviation tax to subsidize high-speed rail (HSR). We find that when the HSR subsidy is not directly linked to the aviation tax, introducing this subsidy will decrease the air traffic and increase the rail traffic on the route where air transport and HSR compete. However, if part of the aviation tax revenue is earmarked for the HSR subsidy (i.e., the integrated tax-subsidy policy), the traffic implications of the HSR subsidy will be the opposite. To extend the analysis to a transportation network, when the integrated tax-subsidy policy only involves aviation tax revenue from routes with HSR presence, it will decrease air traffic on routes without HSR. When the integrated tax-subsidy scheme involves tax revenue from the whole network, the traffic implications depend on the comparison between aviation tax rate on routes with and without HSR. (c) 2021 Elsevier Ltd. All rights reserved. Aviation has a major impact on the climate system and accounts for 2 to 3 percent of the total greenhouse gas (GHG) emissions of human activity. Although aviation has been hit hard by the Covid-19 global pandemic, the reduction of GHG emissions from this sector is expected to be temporary. The long-term trend is still upward, as the aviation industry had been expanding rapidly for a very long period of time before the pandemic. In particular, up until the pandemic, GHG emissions from international aviation had increased by 83% since 1990. In recent years, the role of aviation in climate change has drawn more and more attention. Growing pressures from investors, environmental groups and passengers in the form of public movements such as ?flygskam? (flight shaming), whereby people are pledging to give up flying, have demanded a radical transformation of the industry. Against such background, more and more countries have levied tax on airfares in order to reduce pollution. For example,