The inclusion of aviation into the EU emission trading scheme – Impacts on competition between European and non-European network airlines

In 2008, the European Commission, the European Parliament and the European Council agreed on including international aviation in the already existing European Union carbon market. From 2012, allowances will be required for all international flights landing at and departing from any airport in the EU. Domestic aviation will be subject to the same rules as international air traffic. Model-based empirical estimations presented in this paper indicate a diverse set of effects influencing competition between European and non-European aircraft operators. Initially, this paper provides an overview on recent political developments on EU as well as on International Civil Aviation Organisation level on the subject of emissions trading and aviation. Subsequently, our modelling approach and the main results concerning impacts on operating costs, ticket prices and cargo rates for European and non-European aircraft operators are presented and discussed. Finally, conclusions about the impacts on competition between European and non-European airlines are drawn.