Carbon tax or sustainable aviation fuel quota

Changmin Jiang and Hangjun Yang

Energy Economics, 2021, vol. 103, issue C

Abstract: In this paper, we build a simple model to compare two policies, i.e., carbon tax and sustainable aviation fuel (SAF) quota, in curbing the greenhouse gas emission from the aviation industry. We consider two policy objectives, which are emission oriented, i.e., controlling the expected total emission under a certain level; and social welfare oriented, i.e., maximizing the expected social welfare level. With emission-oriented policies, we find that the more ambitious the emission target is, the more likely that SAF quota outperforms carbon tax in emission control if the realized price of the traditional aviation fuel (TAF) is lower than the expected value. Besides, it is more likely that SAF quota can lead to higher social welfare level than carbon tax if the price of SAF decreases. With welfare-oriented policies, the emission level is higher under carbon tax than under SAF quota when the SAF price is sufficiently low. However, carbon tax can lead to higher social welfare level than SAF quota when there is no uncertainty in the TAF price.

Keywords: Carbon tax; Sustainable aviation fuel; Emission; Social welfare (search for similar items in EconPapers)
JEL-codes: L5 L9 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988321004424
Full text for ScienceDirect subscribers only

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:eee:eneeco:v:103:y:2021:i:c:s0140988321004424

DOI: 10.1016/j.eneco.2021.105570

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().