Pricing Carbon in the Aviation Sector: Supply Effects of the European Emissions Trading System

45 Pages Posted: 8 Jun 2020

See all articles by Xavier Fageda

Xavier Fageda

University of Barcelona

Jordi Teixido-Figueras

European University Institute

Date Written: May 13, 2020

Abstract

We examine the causal impact of carbon pricing on aviation supply exploiting a policy change in the European Emissions Trading system (EU ETS). Our econometric approach is based on a matched differences-in-differences strategy. We find that low-cost airlines end up supplying 7% fewer seats than the counterfactual. When we restrict the estimation to routes on which intermodal competition may exist, the reduction in seats is 23% greater than the counterfactual and the change is persistent in time. Finally, network airlines are found to increase the average size of their aircrafts as a result of the EU ETS.

Keywords: carbon pricing, EU ETS, aviation, climate policy, ifferences in differences, matching

JEL Classification: Q54, D22, L93

Suggested Citation

Fageda, Xavier and Teixido-Figueras, Jordi Josep, Pricing Carbon in the Aviation Sector: Supply Effects of the European Emissions Trading System (May 13, 2020). Available at SSRN: https://ssrn.com/abstract=3600105 or http://dx.doi.org/10.2139/ssrn.3600105

Xavier Fageda (Contact Author)

University of Barcelona ( email )

Av. Diagonal 690
08034 Barcelona
Spain
0034 934021947 (Phone)
0034 934024573 (Fax)

Jordi Josep Teixido-Figueras

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

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