Abstract
A two-stage game model is proposed in this paper to study how China can best respond to the European Union (EU) Aviation
Carbon Tax Scheme. Four possible strategies of China can be chosen, including “non-resistance”, “refusal of pay”, “retaliatory
duties” and “credible threat”. The analytic result shows that the strategy “refusal of pay” makes a consensus with the Chinese
policy as an optimal strategy for China. The main contribution of this paper is to study a heated divergence on aviation carbon tax
by using a two-stage game model.