How to Allocate the Allowance for the Aviation Industry in China’s Emissions Trading System

Abstract

In order to combat climate change and control emissions in the aviation industry, it is necessary to research the aviation industry’s potential application of China’s Emissions Trading System (ETS), especially the carbon allowance allocation (CAA). On the basis of historical and benchmarking CAA schemes, considering the responsibility, capacity, and potential of firms, this study proposes the indicators CAA (ICAA) scheme. Moreover, considering firms’ costs, this study also proposes a multi-objective CAA (MCAA) scheme. Finally, the most effective scheme is reported. Results show that under ICAA and MCAA, caps are lower and basically consistent with the emissions reduction target of the “13th Five-Year Plan Work Program for Controlling GHG Emissions of Civil Aviation in China” and international goals. Different types of airlines gain different quotas according to their income and the number and age of their aircraft. The cost of reducing emissions in each scheme is less than 0.35% of their total costs. Under the ICAA-S, ICAA-P, and MCAA schemes, airlines can achieve a reduction in emissions of 19.7%, 20.9%, and 19.6%, respectively. Moreover, under MCAA, the difference in quotas between airlines is smaller. Therefore, of the schemes evaluated, MCAA is the most effective.