The EU Climate Policy and Its Impact on Market Value of Aviation Sector Companies

The negative consequences of the rapid passengers and cargo air transport development, such as climate change and the increase in air pollutants emissions, caused the tightening of the EU climate policy towards the aviation sector. One of the actions taken by the EU to reduce CO2 emissions derivedfrom commercial flights was the inclusion of aviation into the European Union Emission Trading Scheme (EU ETS). The paper presents the most important rules of the EU climate policy aimed at the CO2 emissions reduction by aircraft operators, mainly related to their participation in the EU ETS. The changing EU climate policy is a source of uncertainty about future operating conditions for aviation sector companies, which may also affect investors' interest in this sector. Therefore, the Markov-switching multifactor model is used to assess the impact of the European Aviation Allowances prices' variability on the market value of chosen European aviation companies in the period 2012-2017.