The Economic Impact Of The Introduction Of Eu Ets

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In the 21st century, carbon emission has been a hot issue around the global. Even though the aviation industry accounts for around 2% of all human-induced CO2 emissions, aviation produced 705 million tonnes of CO2 in 2013 (ATAG, 2014). It is projected to maintain the increasing pattern due to the rising demand of air travel and air-cargo shipments. In this paper, I will discuss the economic impacts of the introduction of EU ETS (January 2012), focusing on international airlines.
To reduce the greenhouse gas emissions, the EU has launched the EU Emission Trading System (ETS) on carbon dioxide emission also known as “cap and trade” program. This covers many industries including aviation (European Commission, 2012a). From January 2012, all the flights taking-off from or landing at EU airports are subject to the EU ETS.
However, the plan is not enforced by several airlines and aviation authorities. The EU ETS excludes international flights while it is mainly for flights within the European Union (European Commission, 2012a).
In the trading period between 2008 and 2012, the prices in the EU ETS varied from €7.96 to €28.73 (Jasper Faber et al, 2011). Price projections are uncertain, due to the banking system for allowances which have not been renounced during recession. The range is estimated between €17 and €70 for the trading in 2020 (Jasper Faber et al, 2011). Airlines which do not comply with the EU ETS will face an excess emissions penalty of €100 per tonne of CO2. This is
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