Economic impacts of power-to-liquid fuels in aviation: A general equilibrium analysis of production and utilization in Germany

Publikation: Beitrag in FachzeitschriftArtikelForschungPeer-Review

Autoren

  • Tobias Mueller
  • Etti Winter
  • Ulrike Grote

Externe Organisationen

  • Technische Universität Braunschweig
Forschungs-netzwerk anzeigen

Details

OriginalspracheEnglisch
Aufsatznummer100632
Seitenumfang26
FachzeitschriftEnergy Conversion and Management: X
Jahrgang23
Frühes Online-Datum25 Mai 2024
PublikationsstatusVeröffentlicht - Juli 2024

Abstract

The aviation industry faces an urgent need to adopt sustainable aviation fuels for significant decarbonization. Power-to-Liquid (PtL) fuel is considered a potential game changer, but questions remain about the wider economic impacts of introducing PtL fuel in the aviation sector. This paper examines the economic impacts of introducing PtL fuel blending quotas along with a price policy consisting of a kerosene tax and PtL fuel subsidies for the case of Germany. Based on a detailed supply chain analysis, we apply a social accounting matrix and a computable general equilibrium model to take into account both, the production and utilization perspectives of PtL jet fuel. Our results show that the influence of low blending quotas is mainly limited to the aviation sector, with a 10 % blending quota increasing consumer prices by 7.9 % and reducing aviation industry output by 3.1 %. When quota levels increase, however, the effects go beyond the air transport system. On inter-sectoral level, we identify three main patterns: First, industries that substantially contribute to the PtL fuel supply chain, such as metal products and electrical equipment, see increasing levels in both, domestic production, and imports. Second, aviation upstream industries like transport infrastructure and aircraft production see reduced domestic production and imports. Third, aviation downstream industries, such as delivery services and travel agencies, see substitution effects, where imports partly replace domestic output. Macroeconomic indicators are affected negatively by the quota scenarios, but the relative impact is low as the maximum decrease in the gross domestic product (GDP) does not exceed 0.35 %. PtL fuel production subsidies can largely mitigate the decrease in aviation demand but come at the cost of a stronger reduction in the GDP and government income. Moreover, the sensitivity analysis emphasizes that various assumptions and parameters, such as the cost projections of PtL fuel, import options, and elasticities of demand, affect the intensity of economic consequences. Our analysis implies the trade-offs of policymaking between sectoral and macroeconomic interests in the context of sustainable fuels. The main contribution of this study is the investigation of the broader economic effects resulting from the adoption of PtL fuels in aviation. In particular, the production as well as the utilization perspective are considered simultaneously in this study.

Zitieren

Economic impacts of power-to-liquid fuels in aviation: A general equilibrium analysis of production and utilization in Germany. / Mueller, Tobias; Winter, Etti; Grote, Ulrike.
in: Energy Conversion and Management: X, Jahrgang 23, 100632, 07.2024.

Publikation: Beitrag in FachzeitschriftArtikelForschungPeer-Review

Mueller T, Winter E, Grote U. Economic impacts of power-to-liquid fuels in aviation: A general equilibrium analysis of production and utilization in Germany. Energy Conversion and Management: X. 2024 Jul;23:100632. Epub 2024 Mai 25. doi: 10.1016/j.ecmx.2024.100632
Mueller, Tobias ; Winter, Etti ; Grote, Ulrike. / Economic impacts of power-to-liquid fuels in aviation : A general equilibrium analysis of production and utilization in Germany. in: Energy Conversion and Management: X. 2024 ; Jahrgang 23.
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abstract = "The aviation industry faces an urgent need to adopt sustainable aviation fuels for significant decarbonization. Power-to-Liquid (PtL) fuel is considered a potential game changer, but questions remain about the wider economic impacts of introducing PtL fuel in the aviation sector. This paper examines the economic impacts of introducing PtL fuel blending quotas along with a price policy consisting of a kerosene tax and PtL fuel subsidies for the case of Germany. Based on a detailed supply chain analysis, we apply a social accounting matrix and a computable general equilibrium model to take into account both, the production and utilization perspectives of PtL jet fuel. Our results show that the influence of low blending quotas is mainly limited to the aviation sector, with a 10 % blending quota increasing consumer prices by 7.9 % and reducing aviation industry output by 3.1 %. When quota levels increase, however, the effects go beyond the air transport system. On inter-sectoral level, we identify three main patterns: First, industries that substantially contribute to the PtL fuel supply chain, such as metal products and electrical equipment, see increasing levels in both, domestic production, and imports. Second, aviation upstream industries like transport infrastructure and aircraft production see reduced domestic production and imports. Third, aviation downstream industries, such as delivery services and travel agencies, see substitution effects, where imports partly replace domestic output. Macroeconomic indicators are affected negatively by the quota scenarios, but the relative impact is low as the maximum decrease in the gross domestic product (GDP) does not exceed 0.35 %. PtL fuel production subsidies can largely mitigate the decrease in aviation demand but come at the cost of a stronger reduction in the GDP and government income. Moreover, the sensitivity analysis emphasizes that various assumptions and parameters, such as the cost projections of PtL fuel, import options, and elasticities of demand, affect the intensity of economic consequences. Our analysis implies the trade-offs of policymaking between sectoral and macroeconomic interests in the context of sustainable fuels. The main contribution of this study is the investigation of the broader economic effects resulting from the adoption of PtL fuels in aviation. In particular, the production as well as the utilization perspective are considered simultaneously in this study.",
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TY - JOUR

T1 - Economic impacts of power-to-liquid fuels in aviation

T2 - A general equilibrium analysis of production and utilization in Germany

AU - Mueller, Tobias

AU - Winter, Etti

AU - Grote, Ulrike

N1 - Publisher Copyright: © 2024 The Author(s)

PY - 2024/7

Y1 - 2024/7

N2 - The aviation industry faces an urgent need to adopt sustainable aviation fuels for significant decarbonization. Power-to-Liquid (PtL) fuel is considered a potential game changer, but questions remain about the wider economic impacts of introducing PtL fuel in the aviation sector. This paper examines the economic impacts of introducing PtL fuel blending quotas along with a price policy consisting of a kerosene tax and PtL fuel subsidies for the case of Germany. Based on a detailed supply chain analysis, we apply a social accounting matrix and a computable general equilibrium model to take into account both, the production and utilization perspectives of PtL jet fuel. Our results show that the influence of low blending quotas is mainly limited to the aviation sector, with a 10 % blending quota increasing consumer prices by 7.9 % and reducing aviation industry output by 3.1 %. When quota levels increase, however, the effects go beyond the air transport system. On inter-sectoral level, we identify three main patterns: First, industries that substantially contribute to the PtL fuel supply chain, such as metal products and electrical equipment, see increasing levels in both, domestic production, and imports. Second, aviation upstream industries like transport infrastructure and aircraft production see reduced domestic production and imports. Third, aviation downstream industries, such as delivery services and travel agencies, see substitution effects, where imports partly replace domestic output. Macroeconomic indicators are affected negatively by the quota scenarios, but the relative impact is low as the maximum decrease in the gross domestic product (GDP) does not exceed 0.35 %. PtL fuel production subsidies can largely mitigate the decrease in aviation demand but come at the cost of a stronger reduction in the GDP and government income. Moreover, the sensitivity analysis emphasizes that various assumptions and parameters, such as the cost projections of PtL fuel, import options, and elasticities of demand, affect the intensity of economic consequences. Our analysis implies the trade-offs of policymaking between sectoral and macroeconomic interests in the context of sustainable fuels. The main contribution of this study is the investigation of the broader economic effects resulting from the adoption of PtL fuels in aviation. In particular, the production as well as the utilization perspective are considered simultaneously in this study.

AB - The aviation industry faces an urgent need to adopt sustainable aviation fuels for significant decarbonization. Power-to-Liquid (PtL) fuel is considered a potential game changer, but questions remain about the wider economic impacts of introducing PtL fuel in the aviation sector. This paper examines the economic impacts of introducing PtL fuel blending quotas along with a price policy consisting of a kerosene tax and PtL fuel subsidies for the case of Germany. Based on a detailed supply chain analysis, we apply a social accounting matrix and a computable general equilibrium model to take into account both, the production and utilization perspectives of PtL jet fuel. Our results show that the influence of low blending quotas is mainly limited to the aviation sector, with a 10 % blending quota increasing consumer prices by 7.9 % and reducing aviation industry output by 3.1 %. When quota levels increase, however, the effects go beyond the air transport system. On inter-sectoral level, we identify three main patterns: First, industries that substantially contribute to the PtL fuel supply chain, such as metal products and electrical equipment, see increasing levels in both, domestic production, and imports. Second, aviation upstream industries like transport infrastructure and aircraft production see reduced domestic production and imports. Third, aviation downstream industries, such as delivery services and travel agencies, see substitution effects, where imports partly replace domestic output. Macroeconomic indicators are affected negatively by the quota scenarios, but the relative impact is low as the maximum decrease in the gross domestic product (GDP) does not exceed 0.35 %. PtL fuel production subsidies can largely mitigate the decrease in aviation demand but come at the cost of a stronger reduction in the GDP and government income. Moreover, the sensitivity analysis emphasizes that various assumptions and parameters, such as the cost projections of PtL fuel, import options, and elasticities of demand, affect the intensity of economic consequences. Our analysis implies the trade-offs of policymaking between sectoral and macroeconomic interests in the context of sustainable fuels. The main contribution of this study is the investigation of the broader economic effects resulting from the adoption of PtL fuels in aviation. In particular, the production as well as the utilization perspective are considered simultaneously in this study.

KW - Aviation

KW - Blending quota

KW - General equilibrium

KW - Power-to-liquid

KW - Social accounting matrix

KW - Supply chain analysis

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DO - 10.1016/j.ecmx.2024.100632

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JO - Energy Conversion and Management: X

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