Over the last two decades many airline markets have been deregulated, resulting in increased competition and use of different types of networks. At the same time there has been an intense discussion on environmental taxation of airline traffic. It is likely that an optimal environmental tax and the effects of a tax differ between different types of aviation markets.

In this paper, we address the issue of optimal environmental taxation under imperfect competition. The problem is analysed for three different types of duopoly models, the Cournot open and closed loop models, and the Stackelberg model.