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The Impact of the EU-ETS on the Aviation Sector: Competitive Effects of Abatement Efforts by Airlines

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In the next few years, it is estimated that the aviation sector will account for more than 15% of total GHG emissions against the current 5%. In order to curb emissions, Directive 101/2008/EC has included the aviation sector within the scope of the European Union Emission Trading Scheme (EU-ETS). The EU-ETS is generating additional costs for airline companies. The present article develops an original model with which to analyse the impact of EU-ETS on the aviation sector's market equilibrium. Our study expands prior research by explicitly allowing for abatement efforts in the cost function of airline companies and by highlighting interactions among strategies to reduce emissions, firm's actions in the secondary market, free allowances, and fines. The results contribute to enhancing policy makers understanding of the impact of the EU-ETS on the aviation sector also in light of its potential global-level extension that is currently under negotiation.

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  • Nava, Consuelo R. & Meleo, Linda & Cassetta, Ernesto & Morelli, Giovanna, 2017. "The Impact of the EU-ETS on the Aviation Sector: Competitive Effects of Abatement Efforts by Airlines," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201710, University of Turin.
    • Handle: RePEc:uto:dipeco:201710
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