If I understand the accord correctly, the difference is existing emissions are grandfathered in/exempt. The offsets are only required on emissions growth (new emissions above current levels). So a new entrant would have to pay the "tax" on all new flights while the legacy carriers only pay on the difference from present flights.

>> Why wouldn't the tax on fuel be a barrier to competition too, under your reasoning? To grow, the smaller airline would need more fuel, and so would be paying more.

Under the proposal, nobody pays anything if they maintain their current emissions. But if a small airline grows and takes market share from a big one, the small one will have to buy credits and the big one will be able to sell credits. The little guy in effect pays the big guy for taking his market share.

If you tax the fuel directly, everyone gets a cost increase right away which they should pass on to their customers. But it doesn't have adverse effects on the free market like the credit system does. You fly more planes, you'll pay more taxes but in proportion to your new revenue so it doesn't really matter.

I think the difference is that under a tax, air travel can still expand without bound as people are willing to pay more for the air travel, but if you cap emissions, then air travel can't expand, regardless of whether people are willing to pay more than the cost of the environmental damage.

(And yes, folks, the environmental damage from any one use is bounded; it can't possibly cost more than the cost to undo that damage. If your model of the environmental damage implies it is infinity, it's just wrong, and it's driving bad policy.)

But it seems like credits needed aren't proportional to emissions, but emissions growth.

Why would you bother making the system more complicated. If it's determined that use of fuel creates emission problems, then just tax it at the start and don't try to worry about every industry to come.