cult time justifying the expense of optional engine equipment to reduce emissions if standard, lower-cost engine configurations already meet regulatory requirements. If low-emission engines cost more and provide no additional benefits other than low emissions, they make it harder to satisfy the consumer’s desire for low fares.

Establishing appropriate financial incentives can be difficult, because government officials cannot easily predict the effects of proposed interventions, especially when they depart from the traditional regulatory approach. Possibilities include the following:

  • adjusting operational costs (such as landing fees, fuel taxes, or fees for air traffic control services) to provide financial incentives to improve system operational efficiency by shifting flights from peak hours and congested airports to off-peak hours and less congested airports (incentives would have to be passed on to consumers through changes in ticket prices to alter consumer behavior in a way that would allow airlines to compete effectively with an altered schedule)

  • adjusting landing fees according to the amount of emissions or noise produced by each aircraft

A few airports in Europe are already using the latter approach, but it would be more effective if implemented through international authorities to avoid a patchwork of unpredictable requirements with inconsistent goals. Also, financial incentives should be administered in a revenue-neutral way (i.e., higher fees for some aircraft operations should be offset by lower fees for other aircraft operations) to avoid using environmental concerns simply as a means to raise taxes.


Aviation policy should satisfy national environmental goals and the public’s demand for aviation services. Government policies could be improved if decision makers had a more comprehensive understanding of the societal benefits and costs associated with air transportation, especially with regard to nonmarket factors such as congestion, noise, and emissions. This knowledge would aid in establishing policies (with regard to research, regulations, and financial incentives) that allow consumers, operators, and manufacturers to make individual decisions consistent with government interests in maximizing overall benefits and reducing overall costs.

Economic efficiency is already used both in the ICAO’s Committee on Aviation Environmental Protection and in the FAA’s own rulemaking process, which calls for cost-benefit analyses of proposals to issue new or amended regulations, expand airports, or modify airport operating restrictions. For example, Part 161.305 of the Federal Aviation Regulations requires that airport operators proposing aircraft operating restrictions provide evidence that “other available remedies are infeasible or would be less cost-effective” than the policy being proposed.

Economic Costs of Noise

As discussed in Chapter 2, community resistance to noise begins somewhere between 55 and 65 dB DNL, with the higher level being the current definition for noise-affected populations applied by both the FAA and the Department of Housing and Urban Development and the lower level suggested by the EPA.

Existing research has investigated the economic consequences of noise exposure in communities empirically. Several studies have examined the impact of noise on property value, concluding that home prices drop about 0.6 percent per dB of DNL exposure (Schipper et al., 1998). Many of these studies are 20 years old, however, and need to be updated to determine if the tolerance for noise has changed.

In addition to property value, another measure of the cost of noise is the willingness of property owners to accept the noise in exchange for payment. Knowing what people would be willing to accept to be exposed to different levels of noise could form the basis for making periodic payments for noise easements (for example, in the form of reduced property taxes). The cost-effectiveness of such payments could be compared with other tools used to address community resistance to noise (i.e., airport operating restrictions, regulations, the purchase of property in noise-affected communities, zoning land for uses compatible with the level of noise, and NASA research and technology programs).

Although the acceptability of noise varies from place to place, the aircraft that produce the noise must be accepted everyplace they fly. In the United States, airport noise regulations are the sole province of the federal government. In accordance with Part 161 of the Federal Aviation Regulations, airports and state and local governments may impose new aircraft noise and access restrictions only after demonstrating to the FAA that less-costly alternatives are not available. Since this requirement was established in the early 1990s, no airport or state or local government has met the requirements of Part 161 to impose new restrictions. Noise exposure dropped dramatically during the 1990s in any case, because of the concurrent decision to lower noise standards and phase out older, noisier (Stage 2) aircraft that could not meet the new standards.

Economic Costs of Local Emissions

The Clean Air Act and FAA certification regulations (Federal Aviation Regulations, Part 34) regulate allowable levels of emissions. When an airport is located in a non-attainment area (i.e., an area that does not meet federally mandated air quality levels), airport expansions can be delayed until local air quality is in compliance. EPA standards are based on the health effects and, ultimately, the economic

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