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

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.