Aviation Industry and the European Emission Trading Scheme. A High Cost Flight to Sustainability?

The Directive 2008/101/EC introduces the extension of the European Union Emission Trading Scheme (EU-ETS) to the aviation sector. This decision rises many concerns about the costs that European and no-European companies have to face. The paper aims to provide an estimation of the environmental costs that aviation industry has to manage in Italy in 2012, the first year the sector will be officially part of EU-ETS. The goal is to understand if the EU-ETS could damage competitiveness of the flying companies. At first the paper presents an economic analysis of the European regulatory framework describing the main contents of the Directive 2008/101/EC. After, it shows the calculation methodology used to estimates the costs EU-ETS could generate on aviation sector in Italy in 2012. The following section shows the results from the analysis which indicate that the industry could suffer relevant environmental costs because of EU-ETS which vary from 0,94 and 3,08 per cent of the turnover if emission permits prices fluctuate from 10 to 30 Euros per t of CO2. Some policy indications close the paper.