Leading article: The absurd economics of a protected industry

There can be no disguising the fact that the open skies aviation issue poses some rather uncomfortable questions for a newspaper like The Independent, which is serious about protecting the environment and yet also supports the free market. Few would defend the existing restrictions on transatlantic air traffic. There is no reason why a handful of British and American airlines should be the only carriers that can operate freely on this route. The European Union was right to get rid of this piece of shameless protectionism. Doing so will boost competition and should result in a superior service for passengers.

The only economically regrettable aspect about yesterday's agreement by European transport ministers - aside from the fact that it remains somewhat biased towards the US airlines - is that it will not come into effect until next March. A handful of airlines have had an unfair advantage for three decades. Why should they be given an extra year in which to cash in?

Yet this reform will also, by bringing down airfares, eventually increase the volume of transatlantic air traffic. This is what happened when a similar open skies agreement was agreed in Europe 10 years ago. That resulted in the runaway success of the low-cost budget carriers Ryanair and easyJet. This is all bad news from the perspective of the struggle against climate change. Air travel is the fastest-growing source of the UK's greenhouse emissions. If it begins to grow internationally at the same rate, all the world's efforts to reduce emissions in other areas will be cancelled out.

A similar conflict of principle is presented by BA's flights from London to Newquay which began this week. BA has a perfect legal right to enter this market. Other carriers are already shuttling between the two points. But these new flights are clearly detrimental to the environment, as is the rapid expansion of regional UK airports. Though domestic flights are short, they are extremely harmful because they release carbon dioxide at a high altitude. They are also a hugely inefficient method of transport because they use so much energy taking off and landing.

But before we conclude that the two principles held by this newspaper are incompatible, it is worth looking more closely at the issue of aviation. While the monopoly on transatlantic flights is manifestly wrong, that is not to say that the feebleness of the international community in curbing the number of flights being taken is right. In other words, handing a handful of airlines a lucrative monopoly is a very unsatisfactory way of keeping down air traffic volumes.

There is a far more effective and honest way. Measures such as a hefty tax on flights, tax on aviation fuel and restrictions on airport expansion are required. The tax breaks for airlines have been a colossal hidden subsidy over the past five decades. The result is that it makes financial sense for some airlines to fly empty flights from point to point, solely to retain their lucrative airport landing slots. This is the Alice in Wonderland economics that has been created by the world's mollycoddling of the airline industry.

And domestic flights are a very different issue. There is no realistic alternative to at least some transatlantic air travel. But there is a very clear green alternative to most domestic air travel: the railways. Put simply, governments should clamp down on domestic air travel and curtail regional airport expansion because passengers can take the train instead.

Ideally, greater international aviation competition and a new tax regime would have been introduced in tandem. We now have the first. For the sake of the planet, it is incumbent on our leaders to establish the second soon.