sa-02x04

1. This course is prepared under the Erasmus+ KA-210-YOU Project titled
«Skilling Youth for the Next Generation Air Transport Management»
Sustainability
Management in Aviation
The economic perspective – ‘Externalities’ and
environmental policy – Part IV
Prof. Dr. Frank Fichert
Worms University of Applied Sciences

2. The economic perspective – Part IV 2
Damage and abatement costs
Emissions cause damage
In most cases the marginal damage, i.e. additional damage caused by one additional unit
of emissions, will be increasing with the amount of emissions.
Assume that damage can be monetarized (will be discussed in more detail later)
A marginal damage function (next slides) shows the relation between the level of
emissions and the damage that is caused by these emissions.

3. The economic perspective – Part IV 3
Marginal damage function
One option:
Rather flat and
linear function
MD
emissions
MD

4. The economic perspective – Part IV 4
Marginal damage function
Another option:
Non linear function
MD
emissions
MD

5. The economic perspective – Part IV 5
Marginal damage function
Total damage:
area below MD function
MD
emissions
MD
e0

6. How to put a ‘price tag’ on damage?
The economic perspective – Part IV 6
Marginal damage function
First step: Causality – Which emissions cause which effects?
Second step: Monetarization – What are the costs of these effects?
Different methodologies, esp.: Market prices (e.g. damage to building)
Stated preferences (survey on willingness to pay/sell)
Revealed preferences (house prices might depend on noise level)
Selected problems: Data / methodologies
Future damage (discounting?)
Studies often calculate average rather than marginal damage.

7. How to put a ‘price tag’ on damage?
The economic perspective – Part IV 7
Marginal damage function
=> If you are interested in the monetarization of externalities you will find some suggestions for
further reading in Sust Material 02-02
=> Please continue with video/slides ‘Sust S/V 02-05’