The focus of existing policy to reduce CO2 emissions from air travel has been on trying to manage air travel demand by raising the price of travel for passengers. Even the recent debate on emissions trading in Europe has focused on the costs it will impose on airlines and their passengers.The results contained in this report show that policies that aim to reduce emissions by managing demand, through raising the price of air travel, are likely to fail. Tourists are shown to be very sensitive to prices for air travel on competing airlines or to alternative destinations. However, at the national or supra-national level these choices cancel each other out and the overall market is much less sensitive to the cost of air travel. It is economic growth and incomes that are found to have been the key drivers of air travel demand, and those drivers are expected to remain particularly strong in the developing markets of Asia. Decoupling emissions from travel growth needs to focus not on demand management but on mechanisms to bring about emission reduction measures from technology, infrastructure and operations.Climate policies will need to focus on creating incentives where there can be effective investment in emissions reductions. The major potential would appear to be on decoupling emissions from travel growth, through supply-side innovations, rather than trying to manage demand through raising the price of travel.There is a need to look beyond rudimentary economic instruments (e.g. passenger taxes) that seek to manage demand by raising the price of travel for the passenger in order to incentivise effectively the various players along the air transport value chain who can invest in emission reduction.IATA’s four pillar climate strategy12, which was endorsed by the Assembly of the International Civil Aviation Organisation in 2007, focuses action on emission reduction measures from technology, infrastructure, operations and those brought about by well designed economic instruments