Market-based measures and aviation sustainability in the European Union: an assessment

Riccardo Colantuono ()
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Riccardo Colantuono: University of Siena, Regulation for Sustainability (R4S), Italy

No 921, SEEDS Working Papers from SEEDS, Sustainability Environmental Economics and Dynamics Studies

Abstract: This study analyzes the current status of the civil aviation industry in the context of two market-based measures designed for the mitigation of CO2 emissions: the European Union Emissions Trading System (EU ETS) and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). These mechanisms are central in the challenge to decarbonize aviation and their principles, structure and coexistence perspectives will be the object of this article. In the first section of this study the status of the aviation industry in the EU ETS will be described. After a brief explanation regarding the basic functioning of the scheme, a historical perspective will allow to understand how and why aviation has come to a privileged position in the EU ETS, meaning that the system is failing to apply the appropriate price on the sector’s emissions which have continued to grow exponentially in the last decade as a consequence of this deficiency. Consequently, some policy suggestions that may correct this issue will be discussed. The second section analyzes another market-based mitigation mechanism: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA is a global scheme adopted in 2016 by the International Civil Aviation Organization (ICAO), which is a United Nations agency. CORSIA has commenced its operations in January 2021 and its historical developments, structure and functioning system will be analyzed thoroughly in this study. However, scholars and observers have highlighted several issues in its functioning mechanisms that could significantly reduce its effectiveness. These hindrances will be identified and explored in the third section of this study, and may be listed as it follows: voluntary nature and lack of enforcement, issues inherent to offsetting, issues with the rules concerning SAFs, issues with ICAO transparency and industry influence and the decision taken by ICAO to change the baseline year as a response to the COVID-19 pandemic. The final part of this study is subsequently devoted to comparing CORSIA, the EU ETS and perspectives about their coexistence, as at European level policy options regarding their relationship are currently in the process of being designed. In fact, a proposal for a regulation concerning these issues is currently being discussed in the European Commission and is expected to be adopted in the second quarter of the current year. Once this legislative decision is taken, the challenge of addressing aviation’s climate impact from a market-based standpoint may be a step closer.

Keywords: Emission; trading; scheme (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021-07, Revised 2021-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-isf
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http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0921.pdf First version, 2021 (application/pdf)
http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0921.pdf Revised version, 2021 (application/pdf)

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