Research on Carbon Offset Decision of Airlines under Mandatory Blending Policy of Sustainable Aviation Fuel

Lei Xu, Jirao Yu and Junwei Zhang ()
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Lei Xu: Civil Aviation University of China, School of Management and Economics
Jirao Yu: 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 200-208 from Springer

Abstract: Abstract Against the backdrop of ICAO’s long-term goal of achieving net-zero carbon emissions in international aviation by 2050, mandatory sustainable aviation fuel (SAF) blending policies and carbon trading mechanisms serve as vital tools for airlines’ low-carbon transformation. This paper establishes a duopoly Stackelberg game model consisting of a leader airline and a follower airline with different fuel efficiency levels to analyze their carbon offset decisions under uniform and differentiated SAF blending mandates. It derives equilibrium solutions for optimal capacity, profit and carbon allowance surplus, and investigates the impacts of SAF blending ratios. Empirical results based on the Xuzhou–Guangzhou route operated by China Southern Airlines and Loong Air show that if leader airline mixes higher levels of SAF, their high SAF costs will severely compress profits and suppress capacity investment, while follower airline may seize the market through capacity expansion under high mandatory blending ratio policies, relying on its fuel efficiency advantage. Despite being constrained by high SAF usage costs, its profits are relatively less affected than leaders.

Keywords: Sustainable aviation fuel; Mandatory blending policy for sustainable aviation fuels; Carbon offset (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-699-9_22

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DOI: 10.2991/978-94-6239-699-9_22

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