Market Competition and Greening Transportation of Airlines Under the Emission Trading Scheme: A Case of Duopoly Market

Jiuh-Biing Sheu () and Fang Li ()
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Jiuh-Biing Sheu: Department of Business Administration, National Taiwan University, Taipei 10617, Taiwan, ROC
Fang Li: Department of International Shipping and Logistics, School of Naval Architecture, Ocean and Civil Engineering, Shanghai Jiao Tong University, Shanghai, China

Transportation Science, 2014, vol. 48, issue 4, 684-694

Abstract: In response to the growing need to reduce greenhouse gas (GHG) emissions worldwide, the emission trading scheme (ETS) has become one of the most efficient instruments to reduce GHG emissions. For example, the European Union (EU) now charges a carbon emission fee to airlines flying into or out of EU airports. This work investigates the effect of carbon permits (CPs) under the cap-and-trade scheme on competition and green transportation strategies of global airlines using a behavioral economics approach. One feature of the proposed model is that passenger attitudes toward green transportation service with perceived uncertainties are conceptualized into airline response functions to characterize how airlines respond to the CP instrument via pricing and investments in green transportation. Qualitative analyses and a numerical study of the ETS-CP instrument provide important managerial insights into airline repricing and green transportation investment strategies. Most importantly, this work generates a relationship between the green transportation and consumer behavior fields via behavioral economics theory.

Keywords: green transportation; consumer behavior; behavioral economics; emission trading scheme (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ortrsc:v:48:y:2014:i:4:p:684-694

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