Effect Of The EU Aviation Carbon Tax On The Export Of China’s Airline Industry

In November,2008, the EU Commission decided to include the internationalaviation industry into the European Union Emission Trading System (EU-ETS) in thename of “global warming”, and in March,2011, they announced that the EU aviationcarbon tax would be started to be imposed from January1st,2012. According thisannouncement, all the airlines which fly across EU have to submit the carbonemission data, and have to pay the carbon emission tax for the excessive carbonemission. This new aviation carbon tax policy causes huge disputes in the wholeworld. Although due to the powerful international stress, the carbon emission taxpolicy isn’t carried out actually, but that doesn’t mean it won’t be carried out in thefuture. Once the EU carries out the aviation carbon tax policy, then it will have hugenegative impact on the international air transport industry and may cause trade warsand then weaken our air transport industry which is blooming now. This paper ismainly to analyze the effect of EU aviation carbon tax on the Chinese airline industryand come up with some practical countermeasures.Firstly, this paper generalizes the study background and meaning, elaborates theliterature review about aviation carbon tax and gravity model at home and abroad, andanalyzes the development of EU-ETS and its economic theories. It introduces thepurposes and specific measures and policy disputes of EU aviation carbon tax. Thepurposes are based on global warming, EU sovereign debt crises, competitiveness ofEU airlines and leadership in “carbon emission reduction”. The specific measuresinclude application range, quota allocation and punishment system of aviation carbontax. The policy disputes point out that EU aviation carbon tax is against the clauses in“UNFCCC”,“Kyoto Protocol” and “The International Civil Aviation Covenant”. Italso tells about the development, current situation and the export to EU of Chinese airline industry.Secondly, this paper quantifies the effect of EU aviation carbon tax on theChinese airline industry by using trade gravity models. This paper uses the2002-2011trade flow data about airline industry between China and four countries in EU, GDP,exchange rate between RMB and Euro, the oil tax charged by plane from China tofour countries, and the number of people which Chinese airline companies served andthen use EVIEWS to regress. The conclusion is that the aviation carbon tax will havenegative effect on the airline industry trade between china and EU. Then it analyzesthe effect of EU aviation carbon tax on the Chinese airline industry in the followingtwo ways: it will increase the export cost of Chinese airline industry and will reduceits international competitiveness.Thirdly, this paper comes up with some countermeasures for the government andthe airline companies to face the EU aviation carbon tax. In detail, the governmentshould enhance international cooperation and negotiation, use the internationalconventions and WTO dispute settlement mechanism, build our own emissionstrading system and presents new policy about aviation carbon tax. The airlinecompanies should develop their energy-saving and emission reduction technologiesand optimize the airline networks.