EMISSION TRADING–STRATEGY IMPLICATIONS FOR AIRLINES.pdf

EMISSION TRADING – STRATEGY IMPLICATIONS FOR AIRLINES Sascha Albers*, Jan-André Bühne**, Heiko Peters** *University of Cologne, Dept. of Business Policy Logistics **ecotrans consulting ABSTRACT Based on the proposal of the European Commission (EC) on including the aviation sector into the European Emission Trading Scheme, we simulate cost implications for selected airlines and routes and identify and evaluate airlines’ potential deviation strategies. Contrary to the assumptions underlying the EC proposal, our results indicate that, based on their route network design and strategies, airlines are affected in different and competitively relevant ways. However, in line with the EC but different from a variety of studies, our results indicate that the magnitude of the differential cost implications are not sufficient to initiate major network redesigns among airlines. Keywords: Strategy, Airlines, Emission Trading © Association for European Transport and contributors 2007 1 INTRODUCTION In its 2006 proposal (EC, 2006), the European Commission proposes to include aircraft operators (airlines) into its Emissions Trading Scheme (EU-ETS) as a measure to fight global warming by reducing CO2 emissions. Starting with intra-European flights in 2011, airlines are required to hold allowances for their CO2 emissions. Non- European carriers will be included from 2012 with their flights that operate into and out of the European Union (EU) 1 . In the current proposal, the total quantity of allowances for the aviation sector is designed to stabilise emissions at 2005 levels. Airlines will receive