Project 31: Economic Modeling

There are several administrative approaches to reduce aviation's impacts on climate change. One market-based measure of particular interest to governments worldwide is cap-and-trade, which is also referred to as "emission trading." Beginning in 2012, the European Union included aviation in its emissions trading scheme. In the US Congress, various climate bills were under consideration, such as the American Clean Energy and Security Act ("Waxman-Markey Bill"), which is a variant of a cap-and-trade plan and required 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 analyzed the effects of a potential introduction of a cap-and-trade policy in the aviation industry. Analyses were 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. Where the EPPA model's outputs provide information on the world economy, changes of greenhouse gas emissions and the expected cost of carbon, APMT Economics focused on the airline industry, and provided outputs such as operating costs of airlines, demand, or airline fleets. While the project focused initially on the implications of a cap-and-trade policy, the tools enabled the study of a variety of other mitigation options -- for example, the extent to which mandates for renewable fuels in one sector can influence price and availability in other sectors, or the relative economic efficiency of sector-based regulations and standards versus broader economy-wide measures.


  • English


  • Status: Completed
  • Funding: $150000.00
  • Contract Numbers:



  • Sponsor Organizations:

    Federal Aviation Administration

    800 Independence Avenue, SW
    Washington, DC  United States  20591
  • Project Managers:

    Hileman, James

    Maurice, Lourdes

  • Performing Organizations:

    Massachusetts Institute of Technology

    77 Massachusetts Avenue
    Cambridge, MA  United States  02139
  • Principal Investigators:

    Reherman, Clay

  • Start Date: 20120510
  • Expected Completion Date: 0
  • Actual Completion Date: 0
  • Source Data: RiP Project 30582

Subject/Index Terms

Filing Info

  • Accession Number: 01572640
  • Record Type: Research project
  • Source Agency: Department of Transportation
  • Contract Numbers: 10869620, 11093881
  • Files: RIP
  • Created Date: Aug 11 2015 1:00AM