There are several administrative approaches to reduce the negative impacts of aviation on climate change. One market-based measure that is of particular interest to governments around the world is cap-and-trade system, which is also referred to as “emission trading”. Beginning in 2012, the European Union is planning to include aviation in its existing emissions trading scheme. In the US Congress the American Clean Energy and Security Act (“Waxman-Markey Bill”) is currently under consideration, which is a variant of a cap-and-trade plan and requires a 17 percent emissions reduction from 2005 levels by 2020.
Emission trading is based on a cap on the amount of an emitted pollutant and the allocation of allowances, which represent the right to pollute. The number of allowances is reduced over time, according to the initially defined reduction objectives. Companies that emit fewer pollutants than they are allocated can sell the excess to other companies that need more. The trade of allowances thus leads to a reduction of the pollutant by those companies and industries, where the abatement costs are lowest. This approach is therefore more efficient compared to a uniform reduction of emissions across all industries.
Project 31 will analyze the effects of a potential introduction of a cap-and-trade policy in the aviation industry. Analyses will be conducted through the joint application of the Aviation Environmental Portfolio Management Tool, in particular the APMT Economics module, and a global model of economic growth and greenhouse gas emissions, the MIT Emissions Prediction and Policy Analysis (EPPA) model. Whereas the outputs of the EPPA model will provide information on the world economy, changes of greenhouse gas emissions and the expected cost of carbon, APMT Economics will analyze changes of the operating costs of airlines, demand, and airline fleets.
The medium term outcomes of Project 31 will be an assessment of different implementation scenarios of cap-and-trade in aviation and the economic and aviation related impacts. In the long run, further tool development is envisaged to evaluate other research questions involving aviation environmental policy, such as the introduction of alternative jet fuels.
Massachusetts Institute of Technology
Ian Waitz, Professor, Aeronautics and Astronautics, Massachusetts Institute of Technology, iaw@mit.edu
John Reilly, Senior Lecturer, Sloan School of Management, Massachusetts Institute of Technology, jreilly@mit.edu
Thomas Cuddy thomas.cuddy@faa.gov
Description of the MIT Emissions Prediction and Policy Analysis Model
Massachusetts Institute of Technology
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