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The impact of the European Union Emissions Trading Scheme on US aviation

Author

Listed:
  • Malina, Robert
  • McConnachie, Dominic
  • Winchester, Niven
  • Wollersheim, Christoph
  • Paltsev, Sergey
  • Waitz, Ian A.

Abstract

We estimate the economic impacts on US airlines that may arise from the inclusion of aviation in the European Union Emissions Trading Scheme from 2012 to 2020. We find that the Scheme would only have a small impact on US airlines and emissions, and that aviation operations would continue to grow. If carriers pass on all additional costs, including the opportunity costs associated with free allowances, to consumers, profits for US carriers will increase. Windfall gains from free allowances may be substantial because, under current allocation rules, airlines would only have to purchase about a third of the required allowances. However, an increase in the proportion of allowances auctioned would reduce windfall gains and profits for US airlines may decline.

Suggested Citation

  • Malina, Robert & McConnachie, Dominic & Winchester, Niven & Wollersheim, Christoph & Paltsev, Sergey & Waitz, Ian A., 2012. "The impact of the European Union Emissions Trading Scheme on US aviation," Journal of Air Transport Management, Elsevier, vol. 19(C), pages 36-41.
    • Handle: RePEc:eee:jaitra:v:19:y:2012:i:c:p:36-41
    DOI: 10.1016/j.jairtraman.2011.12.004
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    References listed on IDEAS

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    2. Ying Zhang & Yingli Huang, 2023. "Killing Two Birds with One Stone or Missing One of Them? The Synergistic Governance Effect of China’s Carbon Emissions Trading Scheme on Pollution Control and Carbon Emission Reduction," Sustainability, MDPI, vol. 15(13), pages 1-25, June.
    3. Li, Ye & Wang, Yan-zhang & Cui, Qiang, 2016. "Has airline efficiency affected by the inclusion of aviation into European Union Emission Trading Scheme? Evidences from 22 airlines during 2008–2012," Energy, Elsevier, vol. 96(C), pages 8-22.
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    5. Nong, Duy & Siriwardana, Mahinda, 2018. "Effects on the U.S. economy of its proposed withdrawal from the Paris Agreement: A quantitative assessment," Energy, Elsevier, vol. 159(C), pages 621-629.
    6. Philip G. Gayle & Ying Lin, 2021. "Cost Pass‐Through In Commercial Aviation: Theory And Evidence," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 803-828, April.
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    8. Nava, Consuelo R. & Meleo, Linda & Cassetta, Ernesto & Morelli, Giovanna, 2018. "The impact of the EU-ETS on the aviation sector: Competitive effects of abatement efforts by airlines," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 20-34.
    9. Cui, Qiang & Wei, Yi-Ming & Li, Ye, 2016. "Exploring the impacts of the EU ETS emission limits on airline performance via the Dynamic Environmental DEA approach," Applied Energy, Elsevier, vol. 183(C), pages 984-994.
    10. Winchester, Niven & McConnachie, Dominic & Wollersheim, Christoph & Waitz, Ian A., 2013. "Economic and emissions impacts of renewable fuel goals for aviation in the US," Transportation Research Part A: Policy and Practice, Elsevier, vol. 58(C), pages 116-128.
    11. Sheng, Dian & Li, Zhi-Chun & Fu, Xiaowen & Gillen, David, 2017. "Modeling the effects of unilateral and uniform emission regulations under shipping company and port competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 99-114.
    12. Cui, Qiang & Li, Ye, 2017. "Airline efficiency measures under CNG2020 strategy: An application of a Dynamic By-production model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 130-143.
    13. Vasan, Arvind & Sood, Bhanu & Pecht, Michael, 2014. "Carbon footprinting of electronic products," Applied Energy, Elsevier, vol. 136(C), pages 636-648.
    14. Jay S. Coggins & Andrew L. Goodkind & Jason Nguyen & Zhiyu Wang, 2019. "Price Effects, Inefficient Environmental Policy, and Windfall Profits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 637-656, March.
    15. Meleo, Linda & Nava, Consuelo R. & Pozzi, Cesare, 2016. "Aviation and the costs of the European Emission Trading Scheme: The case of Italy," Energy Policy, Elsevier, vol. 88(C), pages 138-147.
    16. Hongbo Duan, Lei Zhu, Gürkan Kumbaroglu, and Ying Fan, 2016. "Regional Opportunities for China To Go Low-Carbon: Results from the REEC Model," The Energy Journal, International Association for Energy Economics, vol. 0(China Spe).
    17. Winchester, Niven, 2019. "A win-win solution to abate aviation CO2 emissions," Journal of Air Transport Management, Elsevier, vol. 80(C), pages 1-1.
    18. Kang, Yicheng & Liao, Sha & Jiang, Changmin & D’Alfonso, Tiziana, 2022. "Synthetic control methods for policy analysis: Evaluating the effect of the European Emission Trading System on aviation supply," Transportation Research Part A: Policy and Practice, Elsevier, vol. 162(C), pages 236-252.
    19. Gavard, Claire & Winchester, Niven & Paltsev, Sergey, 2016. "Limited trading of emissions permits as a climate cooperation mechanism? US–China and EU–China examples," Energy Economics, Elsevier, vol. 58(C), pages 95-104.
    20. Cui, Qiang & Li, Ye & Wei, Yi-Ming, 2017. "Exploring the impacts of EU ETS on the pollution abatement costs of European airlines: An application of Network Environmental Production Function," Transport Policy, Elsevier, vol. 60(C), pages 131-142.
    21. Li, Ye & Cui, Qiang, 2018. "Investigating the role of cooperation in the GHG abatement costs of airlines under CNG2020 strategy via a DEA cross PAC model," Energy, Elsevier, vol. 161(C), pages 725-736.
    22. Miyoshi, Chikage, 2014. "Assessing the equity impact of the European Union Emission Trading Scheme on an African airline," Transport Policy, Elsevier, vol. 33(C), pages 56-64.
    23. Winchester, Niven & Malina, Robert & Staples, Mark D. & Barrett, Steven R.H., 2015. "The impact of advanced biofuels on aviation emissions and operations in the U.S," Energy Economics, Elsevier, vol. 49(C), pages 482-491.
    24. Till Kösters & Marlena Meier & Gernot Sieg, 2023. "Effects of the use-it-or-lose-it rule on airline strategy and climate," Working Papers 36, Institute of Transport Economics, University of Muenster.
    25. Scheelhaase, Janina D., 2019. "How to regulate aviation's full climate impact as intended by the EU council from 2020 onwards," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 68-74.

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