The EU ETS and Aviation: Evaluating the Effectiveness of the EU Emission Trading System in Reducing Emissions from Air Travel
https://doi.org/10.26794/2308-944X-2021-9-1-84-120
Abstract
Over the past 30 years, the aviation industry has seen record-breaking growth whilst enjoying exemptions from most taxes and VAT charges. Currently, the aviation sector is considered one of the fastest-growing greenhouse gas emissions sources. Attempting to reduce these emissions in a cost-effective manner, the EU decided in 2012 to include all flights entering and leaving the EU in their Emission Trading System (EU ETS). It was quickly changed to only include travel within the EU. Nevertheless, as the largest cap-and-trade system in the world, the purpose of the EU ETS is to control the growth of emissions by issuing pollution permit rights. The idea is that by setting an emission ceiling and allowing trade between sectors, emission abatement will happen where it is cheapest and easiest to do. This paper explores whether the EU ETS succeeded in reducing the aviation sector emissions over the period 2012–2018 by employing a General Synthetic Control model to estimate a counterfactual scenario. When using jet fuel consumption as a proxy for emissions, the results indicate that on average the EU ETS led to a 10 per cent increase in jet fuel consumption relative to a scenario where it was not implemented. However, the paper fails to conclude a causal relationship between EU ETS and jet fuel consumption due to drawbacks with the data. Nevertheless, it provides a starting point for future ex-post research concerned with aviation and carbon pricing in the European market.
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Heiaas A.M. The EU ETS and Aviation: Evaluating the Effectiveness of the EU Emission Trading System in Reducing Emissions from Air Travel. Review of Business and Economics Studies. 2021;9(1):84-120. (In Russ.) https://doi.org/10.26794/2308-944X-2021-9-1-84-120
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