Including aviation in the European emissions trading scheme: Impacts on the industry, CO2 emissions and macroeconomic activity in the EU

In July 2008, motivated by the expected high growth of aviation and the related impacts on climate change, the European Parliament adopted a directive to include airlines in the European Emissions Trading Scheme. This paper discusses possible impacts of this inclusion on the aviation industry in terms of CO2 emissions and the macroeconomic activity in the EU. The analysis uses the Energy-Environment-Economy Model for Europe, a dynamic simulation model to investigate impacts of the European Emissions Trading Scheme on air transport.. The impacts on air transport output and the macroeconomic effects are estimated to be small. This was robust to varying the carbon price. However, air transport CO2 emissions were expected to decrease by up to 7.4%, which is more than that estimated previously and stems mainly from the supply-side reaction of the industry. (C) 2009 Elsevier Ltd. All rights reserved.