Question 22N.3.HL.TZ0.a.viii
| Date | November 2022 | Marks available | [Maximum mark: 4] | Reference code | 22N.3.HL.TZ0.a.viii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Explain | Question number | a.viii | Adapted from | N/A |
The information that follows refers to the aviation industry, which is considered a significant contributor to global warming and climate change.
Table 2: Energy used and carbon dioxide (CO2) emissions for rail travel and air travel
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1 joule: a standard unit of energy
2 passenger kilometre: one passenger travelling one kilometre
Table 3: Estimates of price elasticities of demand (PED) for leisure and business air
travel and estimates of income elasticities of demand (YED) for domestic
and international air travel routes
- The aviation sector creates emissions that account for about 4.9% of human made global warming and its share of greenhouse gas emissions is rapidly growing.
- A flight from San Francisco to Paris can produce around 1.25 metric tons of carbon emissions per passenger. This is more CO2 than the average person in certain countries generates in an entire year.
- The energy source for aircraft is not easily substitutable. Road and rail-based passenger vehicles can switch from carbon-based fuels to renewably sourced electricity. Aviation emissions are thus not expected to be easily reduced.
- The aviation industry’s growth has also accelerated as a result of subsidies, including general sales tax and fuel tax exemptions, which are unavailable to other modes of transport.
[Source: De Bruyckere, L., and Abbasov, F., 2016. Aviation ETS – gaining altitude - An analysis of the aviation EU ETS
2013-2015 [online] Available at: https://www.transportenvironment.org/sites/te/files/2016_09_Aviation_ETS_
gaining_altitude.pdf [Accessed 29 September 2021]. Source adapted.
Brajcich, K., 2020. What are Carbon Offsets and How Do They Work? [online] Available at:
https://sustainabletravel.org/how-carbon-offsets-work/ [Accessed 29 September 2021]. Source adapted.
Zeng, Youzhi & Ran, Bin & Zhang, Ning & Yang, Xiaobao, 2021. Estimating the Price Elasticity of Train Travel
Demand and Its Variation Rules and Application in Energy Used and CO2 Emissions. Sustainability. 13(2), 475.
Table 2 U.S. Department of Energy, U.S. Department of Transportation and U.S. Environmental Protection Agency, n.d.]
The information strongly suggests that the aviation industry is responsible for a significant market failure. Using this information and an appropriate diagram, explain the market failure the aviation industry creates.
[4]
An alternative approach, which should be accepted, is that MSB is below the demand curve and the market failure is caused by a consumption externality.
The y axis may be labelled price but could be costs or benefits and the x axis is labelled quantity.
Most candidates were able to provide an accurate diagram showing negative externalities and to explain that the equilibrium level of output was greater than the socially optimal level — thus indicating market failure. Candidates indicated either production externalities or consumption externalities. While the data might suggest that production externalities would be more appropriate, as "the aviation industry is responsible for a significant market failure" both approaches were accepted.
