Carbon leakage from aviation under the European Union Fit for 55 policies

Carbon leakage is an essential concern in the aviation industry. This study combines an aviation sectoral model with a general equilibrium model to assess the leakage associated with the European Union Fit for 55 policies for aviation. Our results show limited and negative carbon leakage when using the aviation sectoral model, but high and positive leakage when using the general equilibrium model. When we input into the aviation sectoral model the lower international market price of fossil kerosene estimated by the general equilibrium model, the leakage also becomes positive in the sectoral model. Most leakage, however, occurs in other sectors. This leads us to conclude that the industry's concerns over carbon leakage are valid, but primarily for reasons of general climate policy efficiency, and not sectoral competitiveness.