Contents lists available at ScienceDirect Energy Policy journal homepage: www.elsevier.com/locate/enpol The potential impacts of Emissions Trading Scheme and biofuel options to carbon emissions of U.S. airlines Hsun Chao a , Datu Buyung Agusdinata b,* , Daniel A. DeLaurentis a a School of Aeronautics and Astronautics, Purdue University, 701 W. Stadium Ave., West Lafayette, 47907, Indiana, United States b School of Sustainability, Arizona State University, Tempe, 85287, Arizona, United States ARTICLE INFO Keywords: Aviation emissions Emissions trading scheme policy Sustainable aviation fuels ABSTRACT To reduce carbon emissions, the European Union has implemented the Emissions Trading Scheme (ETS) since 2012 for intra-European commercial flights. In response, airlines have explored various means, including sus- tainable jet fuels. This article investigates how similar ETS policy would affect domestic carbon emissions when implemented in the United States. The study integrates a model of airlines operations optimization and multi- feedstock biojet fuels life cycle assessment to simulate decisions of biojet fuel and commercial aviation industry responding to an emission policy. We conduct a Monte-Carlo simulation on two scenarios of domestic emission schemes to investigate the adoption of biojet fuels and its impacts on carbon emissions. Our model indicates that implementing an emission policy for U.S. airlines could incentivize adoption of biofuels - a median value of 10% of total fuels in 2050- while only marginally reduce travel demand. Because of a combined effect of emission policy and improved aircraft technology, the emissions in 2050 would only increase 1.37 times the 2005 level despite passenger demand grows by a factor of 2.75. A non-parametric sensitivity analysis suggests that the price of oil, economic growth, and carbon price are the three most significant factors in affecting the fleet-level carbon emissions. 1. Introduction Commercial aviation industry around the world has been at the forefront of efforts to mitigate carbon emissions. The European Commission, for example, has initialized a European Union Emissions Trading Scheme (EU-ETS) in 2012, which was the first platform to regulate and commoditize carbon emissions from commercial aviation. The scheme regulates emissions from flight takeoffs and landings taking place in the European Economic Area. The EU-ETS mechanism allocates free emission quotas to each operating airline. When their actual emissions are beyond the allocated quota, airlines will have to acquire carbon emission allowances from the European regulated carbon allo- cation markets (European Commission, 2003). In addition, the Inter- national Civil Aviation Organization (ICAO) has decided to start the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) after 2021 to keep carbon dioxide emissions from interna- tional aviation from exceeding the 2020 emissions level. Across the Atlantic, the U.S. aviation industry is one of the largest in the world for air traffic volumes (ICAO, 2016). Domestically, U.S. aviation was responsible for about 9% of the total transportation GHG emissions in 2017, which was equal to about 2.6% of the total national GHG emissions (EPA, 2019). The GHG emissions are expected to in- crease because no-domestic emission policy schemes are currently im- plemented or planned for the U.S. airlines. Hence, the question is how an emission policy scheme similar to the EU-ETS would perform in the U.S. context. Previous studies have used different models and approaches to look at the issue of aviation environmental impacts. The System for assessing Aviation's Global Emissions (SAGE) was commissioned by the U.S. Federal Aviation Administration (FAA) to predict aircraft fuel burn and emissions for all commercial (civil) flights globally (Kim et al., 2007; Lee et al., 2007). Furthermore, the impacts of emission policies have been documented. One study on 22 airlines over the 2008–2012 period finds that as a result of EU ETS, airlines operational and business effi- ciency has increased and on average European airlines have higher efficiency that non-European ones (Li et al., 2016). Implementing air traffic emissions taxes would reduce emissions due to lower demand caused by higher airfares. But these gains might be offset by increased emissions as people divert to using automobiles for transport (Hofer et al., 2010). In addition to market-based measures, biojet fuels (i.e. fuels derived from feedstock such as algae, switchgrass, and camelina) have been https://doi.org/10.1016/j.enpol.2019.110993 Received 19 January 2019; Received in revised form 17 July 2019; Accepted 8 September 2019 * Corresponding author. E-mail address: bagusdin@asu.edu (D.B. Agusdinata). Energy Policy 134 (2019) 110993 0301-4215/ © 2019 Elsevier Ltd. All rights reserved. T