Doing Nothing? Carbon Abatement Decisions of Pure Monopoly Airlines under a Dynamic Aviation Carbon Tax

Lei Xu, Longfei Dong and Junwei Zhang ()
Additional contact information
Lei Xu: Civil Aviation University of China, School of Management and Economics
Longfei Dong: Civil Aviation University of China, School of Transportation Science and Engineering
Junwei Zhang: Civil Aviation University of China, School of Transportation Science and Engineering

A chapter in Proceedings of the 2026 4th International Conference on Digital Economy and Management Science (CDEMS 2026), 2026, pp 135-144 from Springer

Abstract: Abstract The aviation carbon tax is a critical policy instrument for emission reductions, yet its impact on airline operations remains under explored. This study investigates the optimal capacity and abatement investment decisions of a monopolistic airline under a dynamic aviation carbon tax. By constructing and solving three models—no tax, tax without abatement, and tax with abatement—we derive equilibrium solutions revealing key insights. When initial carbon allowances are sufficient, the tax policy becomes ineffective. When allowances are scarce, the airline’s abatement level and cost become critical determinants of its optimal strategy. Interestingly, a larger market size or lower abatement cost may paradoxically reduce the airline’s tolerance for the carbon tax. Moreover, under sufficiently high tax rates, even environmentally conscious green airlines may find it optimal to abandon abatement investments altogether. This research provides theoretical contributions and practical insights for airlines in countries with low carbon regulations as they navigate increasingly stringent aviation carbon tax policies.

Keywords: Carbon Abatement Technology Investment; Aviation Carbon Tax; Carbon Allowances; Monopoly Airline (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-699-9_16

Ordering information: This item can be ordered from
http://www.springer.com/9789462396999

DOI: 10.2991/978-94-6239-699-9_16

Access Statistics for this chapter

More chapters in Advances in Economics, Business and Management Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().