Title: Unilateral emission trading and competition between US and EU carriers

Authors: Linda Paul, Mark Lijesen

Addresses: KiM Netherlands Institute for Transport Policy Research, Jan van Nassaustraat 125, 2596 BS, Den Haag; Tilburg University, Warandelaan 2 5000 LE Tilburg, The Netherlands. ' KiM Netherlands Institute for Transport Policy Research, Jan van Nassaustraat 125, 2596 BS, Den Haag; VU University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands

Abstract: From 2011 onwards, the European aviation sector is scheduled to join the Greenhouse Gas Emission Allowances Trading System (EU ETS). European policy makers and airlines alike have now raised concerns that this will lead to a competitive disadvantage for EU carriers relative to those from the USA in the market for transatlantic flights. We use a Cournot model with economies of density on long haul flights to analyse the effects of emission trading. We find that the EU airlines| competitive position is affected, but not hurt as severely as feared. Rather than trying to fight European carriers, US carriers escape fiercer competition due to emission trading costs and revert to other markets in which they have a competitive advantage.

Keywords: aviation industry; uilateral emissions trading; competition; US carriers; EU carriers; transatlantic flights; greenhouse gases; GHG emissions; USA; United States; European Union; Cournot modelling; economies of density; long haul flights; EU airlines.

DOI: 10.1504/IJAM.2011.038290

International Journal of Aviation Management, 2011 Vol.1 No.1/2, pp.4 - 16

Available online: 27 Jan 2011 *

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