LAUSR

Abstract This paper evaluates the financial outlays and environmental costs of using biofuel and traditional aviation fuel for selected flight routes. Cost-benefit analysis and the dose-response method were applied for evaluating the financial and environmental costs of both biofuels and traditional fuel. Selected flight routes originating from Taipei were used for empirical analysis, for the purpose of comparing the use of different fuels in monetary terms. The use of biofuel leads to a considerable increase in fuel purchase price; however, it results in fewer negative environmental impacts compared with the use of the traditional aviation fuel. The empirical results and sensitivity analysis show that the reduction in environmental costs will only outweigh the additional purchase cost of biofuel if the unit environmental social costs of pollutants are considered to be very high. The potential incentives for the use of biofuel in commercial flights could come from some form of government measures that internalize externalities, or from a reduction in biofuel price (e.g. through subsidy) or an increase in traditional fuel price (e.g. through tax). The environmental benefit of using biofuel in commercial flights, estimated in monetary terms and compared with its extra financial cost, provide good reference for policy makers when implementing policies and incentives for the development of biofuels.