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Market Competition and Greening Transportation of Airlines Under the Emission Trading Scheme: A Case of Duopoly Market

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  • Jiuh-Biing Sheu

    (Department of Business Administration, National Taiwan University, Taipei 10617, Taiwan, ROC)

  • Fang Li

    (Department of International Shipping and Logistics, School of Naval Architecture, Ocean and Civil Engineering, Shanghai Jiao Tong University, Shanghai, China)

Abstract

In response to the growing need to reduce greenhouse gas (GHG) emissions worldwide, the emission trading scheme (ETS) has become one of the most efficient instruments to reduce GHG emissions. For example, the European Union (EU) now charges a carbon emission fee to airlines flying into or out of EU airports. This work investigates the effect of carbon permits (CPs) under the cap-and-trade scheme on competition and green transportation strategies of global airlines using a behavioral economics approach. One feature of the proposed model is that passenger attitudes toward green transportation service with perceived uncertainties are conceptualized into airline response functions to characterize how airlines respond to the CP instrument via pricing and investments in green transportation. Qualitative analyses and a numerical study of the ETS-CP instrument provide important managerial insights into airline repricing and green transportation investment strategies. Most importantly, this work generates a relationship between the green transportation and consumer behavior fields via behavioral economics theory.

Suggested Citation

  • Jiuh-Biing Sheu & Fang Li, 2014. "Market Competition and Greening Transportation of Airlines Under the Emission Trading Scheme: A Case of Duopoly Market," Transportation Science, INFORMS, vol. 48(4), pages 684-694, November.
    • Handle: RePEc:inm:ortrsc:v:48:y:2014:i:4:p:684-694
    DOI: 10.1287/trsc.2013.0473
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    References listed on IDEAS

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    Cited by:

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    2. Sahar Validi & Arijit Bhattacharya & P. J. Byrne, 2020. "Sustainable distribution system design: a two-phase DoE-guided meta-heuristic solution approach for a three-echelon bi-objective AHP-integrated location-routing model," Annals of Operations Research, Springer, vol. 290(1), pages 191-222, July.
    3. Wang, Xinyu & Sethi, Suresh P. & Chang, Shuhua, 2022. "Pollution abatement using cap-and-trade in a dynamic supply chain and its coordination," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    4. Jun Tu & Juan Du & Min Huang, 2023. "Competition between Green and Non-Green Travel Companies: The Role of Governmental Subsidies in Green Travel," Sustainability, MDPI, vol. 15(9), pages 1-33, May.
    5. Yuan Yuan & Feng Cai & Lingling Yang, 2020. "Renewable Energy Investment under Carbon Emission Regulations," Sustainability, MDPI, vol. 12(17), pages 1-15, August.
    6. Peng Du & Lei Xu & Rou Luo & Mingzhu Hou, 2024. "Competing with Low Cost Carrier in a Sustainable Environment: Airline Ticket Pricing, Carbon Trading, and Market Power Structure," Sustainability, MDPI, vol. 16(2), pages 1-17, January.
    7. Aasheesh Dixit & Patanjal Kumar & Suresh Jakhar, 2021. "Airport-Airline Coordination with Economic, Environmental and Social Considerations," Papers 2110.11694, arXiv.org.

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