Abstract
Market-based measures “address the market failure of ‘environmental externalities’ either by incorporating the external cost of production or consumption activities through taxes, or charges on processes and products, or by creating property rights and facilitating the establishment of a proxy market for the use of environmental services” (OECD). In 2003, within the frameworks of the Kyoto Protocol and Horizon 2020, the European Union put in place the Emission Trading System (EU ETS). From 2012 on, the Emission Trading Scheme has included the aviation sector. Within two years, there will be a new scheme in place: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), introduced by the International Civil Aviation Organization, will be implemented. Participation in CORSIA will be on a voluntary basis from 2021 to 2026 and will become compulsory from 2027 on. This paper reflects on both the new and old policies, delving into their legal framework, the role of the European Energy Exchange and the Intercontinental Commodity Exchange, and the pricing of carbon.
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Notes
- 1.
Decision 1359/2013/EU.
- 2.
Historical emissions: Average of the annual emissions in years 2004, 2005, and 2006 from aircraft performing activities covered by the ETS.
- 3.
European Organization for the Safety of Air Navigation, also known as EUROCONTROL, collected information from (a) fuel information from Aircraft Operators; (b) databases from the Central Route Charges Office and the Central Flow Management Unit.
- 4.
The opportunity for aircraft operators to buy allowances from both the general and the aviation market, to a certain extent, limits the EU ETS’s objective of creating scarcity of allowances (DEHSt 2018).
- 5.
Each account refers to its national administrator—some national administrators are: “Istituto Superiore per la Protezione e per la Ricerca Ambientale” in Italy, “Climate Registry” in Belgium, “Registre française des quotas et credits d’émission de GES” in France.
- 6.
Data is not available for all the companies for the whole period. In order for the panel data to be balanced, companies with lacking data were excluded.
- 7.
According to EUROCONTROL (2015): A flight is short-haul when the airport to airport distance is less than 1500 km; medium-haul when the airport to airport distance is less than 4000 km but more than 1500; long-haul flight when the airport to airport distance is more than 4000 km.
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Bergantino, A.S., Loiacono, L. (2020). Market-Based Measures: The European Union Emission Trading Scheme and the Carbon Offsetting and Reduction Scheme for International Aviation. In: Walker, T., Bergantino, A.S., Sprung-Much, N., Loiacono, L. (eds) Sustainable Aviation. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-28661-3_7
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