Including Aviation in the European Union Emissions Trading Scheme: Impacts on Industries, Macro-economy and Emissions in China

Abstract

In October 2008, European Union (EU) announced that it would include the international aviation in the European emission trading system (EU ETS). This paper builds a static computable general equilibrium (CGE) model based on the 2007 input-output table, and estimates the impacts from this policy on China’s macro-economic, residents' welfare, aviation industry, and carbon dioxide (CO2) emissions. Our results indicate that the implication of this policy has negative effects on China’s economy and residents’ welfare; nevertheless, it also reduces the outputs of industries especially that in aviation industry.