Returning to these posts and this article, I think I need to clarify and reframe my comments. First, Daniel is right that increasing the cost of carbon-based fuels will drive innovation in more fuel-efficient technologies. It did just that: in the late ’90s, Boeing pitched a fuel-wasting concept, the Sonic Cruiser. Airlines were standoffish at first, but as the price of oil began spiking, everyone disclaimed interest and Boeing scrapped the project for its much more environmentally (and bottom line) friendly 787. But this innovation-fueling (pun not intended) only works up to a point, when the increased costs reach such a level as to drive airlines out of business and leave the aerospace firms in the lurch without enough clients to justify further R&D. So, then, the climate challenge is to find the optimal point at which carbon pricing or emissions trading incentivizes climate-friendly aerospace innovation without breaking the airlines. What that optimal point is, I, a non-economist, am not able to say.
