Competitive Interaction between Airports, Airlines and High-Speed Rail
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Competitive Interaction between Airports, Airlines and High-Speed Rail

How should airports be regulated to contain market power? This round table proceedings first examines whether they need to be regulated at all. It concludes that because regulation is inevitably imperfect and costly, policy makers should establish conditions for competition to emerge between airports in preference to comprehensive regulation, whenever possible.

Economic regulation is sometimes necessary, such as when airports are heavily congested. The proceedings determines which approaches are likely to work best and also assesses strategies for managing greenhouse gas emissions.  It finds that although including aviation in an open emission trading scheme could help mitigate emissions efficiently across the economy, it should not be expected to produce major cuts in CO2-emissions in aviation itself.

Finally the proceedings identifies the economic conditions under which high-speed rail can provide a competitive substitute for aviation, revealing the limited relevance of rail to reducing greenhouse gas emissions from this part of the transport market.
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This paper summarizes, structures and provides some context for discussions of the Round Table mentioned in the title. The first part of the paper focuses on sources of market power for airports and on policy responses. When an airport is congested and competition with other airports is limited, regulation may be justified, and the dual-till approach likely works best. In other cases, however, policy should establish conditions for competition to emerge as much as possible, instead of attempting to design a general regulatory framework. The second part of the paper discusses elements of climate change policy in aviation. Including aviation in emission trading schemes is a sensible idea, but should not be expected to produce major cuts in CO2 emissions from aviation; containing its growth possibly is a more realistic, yet ambitious and not necessarily socially optimal, objective. High-speed rail is justified in some situations, but is not a general alternative for air travel and certainly not a second-best way to reduce greenhouse gas emissions from aviation.
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