Institute for Social and Economic Change
Working Paper: 498
The Impact of Civil Aviation Growth on CO2 Emissions
in India: Evidence from A Time Series Analysis
The Indian civil aviation industry is one of the fastest growing service sectors in India. Considering the growing importance and demand for air travel, this study investigates the effects of revenue passenger kilometer (RPK) of the airline industry, wholesale price index (WPI) of aviation turbine fuel (ATF), fuel efficiency of aviation turbine fuel and per capita income of the country on CO2 emissions from aviation turbine fuel by using yearly time series data for the period 1988 to 2017. To find out the long run relationship between RPK, WPI of ATF, fuel efficiency, GDP-per capita and CO2 emissions, the study uses the Autoregressive Distributed Lag model (ARDL) with the Bound test approach. Bound test approach is applied to estimate if there is a long run relationship among the variables. The empirical results suggest that there exists a long run relationship between CO2 emissions, revenue passenger kilometer, fuel efficiency and per capita income of the country. This study used the error correction term of the ARDL model to find the short run relationships between these variables. Toda-Yamamoto causality test is performed to check the causality among the variables. Empirical estimation of the ARDL model shows that both in the short run and long run, except the variable wholesale price index of ATF, all other variables are significant in relation to CO2 emissions from ATF. Empirical results of the Toda-Yamamoto test suggest a unidirectional Granger causality running from revenue passenger kilometer (RPK) and wholesale price index of aviation turbine fuel to CO2 emissions. The result also shows that there is a bi-directional causality existing between per capita income and fuel efficiency to the CO2 emissions from aviation turbine fuel. The study also suggests that more focus on increasing the efficiency of fuel will lead to a sustainable growth of the industry.