The Impact of the European Commission's Proposal on the Integration of Air Transport into the Emissions Trading Scheme on Competition Between European and Non-european Airlines.



The Impact of the European Commission's Proposal on the Integration of Air Transport into the Emissions Trading Scheme on Competition Between European and Non-european Airlines.

Authors

J Scheelhaase, W Grimme, M Schaefer, German Aerospace Center (DLR), DE

Description

In December 2006, the European Commission has published a proposal on the inclusion of aviation in the EU-ETS. The paper outlines the effects of this plan, with special respect to the initial allocation of allowances and the impact on competition.

Abstract

In December 2006, the European Commission has published a proposal on the inclusion of aviation in the already existing EU emissions trading scheme. The European Commission intends to cap carbon dioxide emissions generated by aviation from 2011 onwards. From this year, aircraft operators will be obliged to surrender allowances for intra-EU flights and from 2012, allowances will be required for all international flights landing at and departing from any airport in the European Union.

Initially, this paper gives an overview on recent political developments on EU as well as on ICAO level on the subject of emissions trading and aviation. It continues with a brief economic and legal analysis of the European Commission?s proposal, with special respect to the proposed method of initial allocation of allowances. Subsequently, the paper concentrates on a qualitative discussion of the impacts on competition between network carriers based in European and non-European countries. The findings of the qualitative discussion are then quantitatively substantiated using flight performance and emissions calculations based on EUROCONTROL?s Base of Aircraft Data (BADA). After a brief discussion of our modelling approach, the main impacts on operating costs, ticket prices and cargo rates for European and non-European aircraft operators are presented and discussed. The economic consequences derived from the model-based empirical estimations presented in our paper indicate a diverse set of effects influencing European and non-European aircraft operators. This is likely to affect not only airlines, but is also likely to have repercussions on the situation of European airports. Finally, it is analysed to what extent the proposed scheme could act as a market entry barrier on the European air transport market.

Publisher

Association for European Transport