Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265836 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2022-060/VIII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper empirically studies how emission pricing affects capital replacement and adoption of embodied environmental technology. A pricing policy encourages firms to accelerate retirement of old capital assets and replace them with newer more efficient assets, but this may crowd out replacements outside the policy. Using asset-level data from the airline industry, I show that the inclusion of intra-European aviation in the European Union Emissions Trading Scheme decreased the retirement age of 'regulated' short-haul aircraft by 2.8 years (14 percent), while the retirement age of 'unregulated' long-haul aircraft increased by 2 years (11 percent). Accounting for the higher emissions of long-haul operations, the net environmental benefit of induced fleet renewal is virtually zero and may even be negative. This demonstrates that regulators must consider the impacts beyond regulated capital when environmental policies are incomplete.
Subjects: 
Environmental policy
emission pricing
carbon leakage
capital replacement
technology adoption
airline industry
JEL: 
O33
L93
Q30
Q54
Q55
Q58
Document Type: 
Working Paper

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