Exploring the impacts of EU ETS on the pollution abatement costs of European airlines: An application of Network Environmental Production Function

•The impacts of the EU ETS on airlines' pollution abatement costs are investigated.•A Network Environmental Production Function is proposed.•The EU ETS has little influence on the pollution abatement costs for most of theairlines.•The “Take off the European referendum” has no direct impacts on U.K.-based carriers.

In this paper, we investigate the impacts of the EU ETS on airlines' pollution abatement costs based on the empirical data of 12 European airlines. We propose a new Network Environmental Production Function to discuss the change of pollution abatement costs between the situations under EU ETS and without EU ETS. We also discuss the impacts of “Take off the European referendum” on UK airlines. The main findings are: 1. Ryanair has the largest pollution abatement costs while those of Lufthansa and Norwegian are zero. 2. The “Take off the European referendum” has no direct impacts on the pollution abatement costs of UK-based carriers. 3. The EU ETS has little influence on the pollution abatement costs of most of the airlines, and a broader package of measures should be necessary.