The impact of aviation on global warming may be small, but it is attracting increased attention. So what should the industry's reaction be?

Airlines are hardly looking for ways to add to their costs. So it is significant indeed that a delegation of European carriers held a meeting with the European Commission (EC) at the start of this year to ask to be allowed to pay for their contribution to global warming. Specifically, they were pressing for airlines to join the European Union (EU) carbon emissions trading scheme, which is due to be launched in 2005.

That they took the trouble to raise the issue at all demonstrates the concern among European carriers about the impending arrival of environmental penalties. Carbon trading looks like the least worst alternative.

A clear reminder that the environmental issue is still alive and well came at the end of last year, as the UK government presented its long-awaited plans for new runways in the UK. Transport secretary Alistair Darling accompanied the proposals with this blunt remark: "Airlines should bear the cost of the environmental damage they do." He pledged that the UK would introduce legislation to allow higher landing charges for more-polluting airlines and would also put itself at the forefront of a global campaign to raise taxation on aviation. He also said the UK would use its 2005 presidency of the EU to push for aviation to be included in the emissions trading scheme.

The problem is not so much aviation's current contribution to global warming, which is relatively modest, but rather the fact that air travel continues to grow so rapidly and with little prospect of diminishing its output of carbon dioxide (CO2), the chief culprit in climate change. Unlike other industrial and transport sectors, aviation has no obvious alternative to burning kerosene.

Climate change

Just how bad is the problem? Andreas Hardeman, manager aviation environment at IATA, refers back to a 1999 report by Intergovernmental Panel on Climate Change (IPCC), a UN-sponsored initiative, which said that aviation accounts for 3.5% of the total climate change effect from human activities. The IPCC report postulated a range of scenarios for growth which would see the percentage rising to anything between 4% and 15% by 2050. The mid range of that forecast is usually taken at 6-10%.

That does not sound too drastic, but environmentalists set it against a backdrop of emissions cuts planned in other industries. Richard Dyer, aviation campaigner for the UK's influential Friends of the Earth points to the UK government's promise to cut CO2 emissions by 60% by 2050. "On that basis, aviation would end up as 90% of the country's CO2 emissions if current growth continues," he says. "Airlines can't get away with being a special case for ever."

There is also the elusive question of upper atmosphere effects. The fact that most aircraft emissions are pumped out at high altitude has implications that are not yet fully understood. A figure often quoted for such "radiative forcing" is that it magnifies the damage caused by the CO2 by 2.7 times, but the science is not yet conclusive. Some scientists also say contrails contribute to cloud formation, so blocking the sun's rays. Jos Dings, manager transport division for Dutch environmental policy consultants CE Delft, says such upper atmosphere effects mean the 3.5% figure almost certainly needs to be revised upwards.

Improvements in aircraft technology can translate into dramatic gains in fuel efficiency as newer aircraft arrive in the fleet. British Airways, for example, quotes a 25% gain over the past decade. But such technological gains are only expected to produce a 1-2% cut in emissions a year, says Andrew Sentance, BA's chief economist, who is also heading environmental affairs.

"Conservative growth rates for the industry are 3-4% and manufacturers say 5%, so we still have a potential 2% growth in emissions: this against the world - apart from the USA at least - saying we have to reduce the amount of emissions," he adds.

Le Thi Mai, general manager infrastructure and environment for the Association of European Airlines (AEA), is even more blunt: "It is clear that we are polluting and technology is not sufficient to offset the impact of our CO2. This is a fact that every airline must recognise."

In Europe, at least, carriers seem to have decided that emissions trading is the best option to bridge this gap. Pressure groups are not averse to such schemes but would still like to see measures to curb growth rates. A fuel tax is a popular rallying point among green campaigns and politicians alike.

At least in Europe, they point to the anomaly that fuel for cars and trucks is highly taxed, while aviation almost uniquely does not even pay sales tax (called value added tax in the EU) on its fuel. Le Thi Mai at the AEA says many EU member states are eyeing a kerosene tax for intra-European flights. "They see it as a way to even up what they say is unfair competition with other modes of transport, as well as a quick way to raise extra tax revenue," she says.

For environmentalists, however, the ultimate goal is to limit growth. "We are not saying people should be priced off planes - many people accuse us of saying that, but it is not true - just that prices should be increased slightly," says Dyer. He claims that the UK government's own computer model showed that even a slight increase in fares would be enough to curtail growth to the point where new runways are no longer needed. "That shows a lot of this growth is being driven by ridiculous cheap fares," says Dyer. "Aviation is an industry that is growing really fast, and we are just saying that growth could be reduced a bit."

The industry response to talk of fuel taxes is simply that such taxes are impractical and, in any case, forbidden by international treaty. Article 24 of the 1944 Chicago Convention forbids the taxation of foreign airlines by any signatory state. Many air service agreements also include such a clause. However, neither measure would stop the EC introducing taxes on intra-European flights or states imposing fuel taxes on domestic flights.

Fuel usage

Sentance also notes that swingeing fuel taxes have not managed to reduce European road use, while Hardeman at IATA is one of many who point out that strong incentives already exist for airlines to reduce their fuel usage. "Fuel is already the second largest operating cost for airlines, so there is no added incentive needed for airlines to operate in the most fuel-efficient way," he says, adding that since airlines are operating at close to technological limits already, it will be increasingly difficult to find additional efficiencies.

This argument is supported by the AEA, with Le Thi Mai pointing to a 1999 study carried out for the EC. "They looked at five scenarios and three levels of tax, and found that with the highest level, EU carriers would use up half a billion euros and 48,000 jobs, but total CO2 emissions in the EU would only fall 0.34%," she says. Dings at CE Delft also points out that a regional kerosene tax could lead to tankering - when aircraft simply fill up in places where fuel is not taxed.

Philippe Rochat, executive director of the Air Transport Action Group (ATAG), points out that ICAO distinguishes between a tax and a charge. The former simply goes into government coffers while the latter pays for a service. Some have proposed that for this reason there could be an emissions charge on airlines without breaching the Chicago Convention. "The problem is that there would be nothing to spend the charge on," says Rochat. "To compensate for climate change, you would have to identify and quantify the damage and prove that it is due to air transport. This would clearly be impossible."

Some airports do already penalise older, less efficient aircraft through their charging regimes. In theory such charges could be used to limit emissions, says Dings, but he points out that airports tend to be locally focused and so it would be difficult to use them as the basis for a coherent global policy.

One other kind of emissions charge, which was studied by CE Delft at the behest of the EC, is the levying of additional air traffic control (ATC) charges on older, more polluting aircraft.

"There seem to be fewer legal obstacles to this approach," says Dings. "Our conclusion was that its primary environmental benefit was through accelerating fleet turnover and reducing the lifetime of aircraft."

Better, argue the airlines, to address Europe's inefficient maze of national ATC regimes. Lufthansa says congestion meant it spent 8,500 more hours in the air than it planned in 2002, consuming 29,400t of additional fuel. Le Thi Mai at the AEA says implementing the EC's proposed Single European Sky would lead to a 5% overall fuel reduction for its member airlines. "But that is outside our control. It is in the hands of EU member states," she says pointedly.

Emissions trading

It is emissions trading that is by far and away the favoured approach of EU carriers. "It is the smart way forward," says Sentance. "Rather than stifling growth, we would be able to grow the industry by buying emissions certificates from other industries that are able to reduce their contribution more cost effectively." Put another way, airlines who cannot reduce their emissions will be helping fund industries such as power generation or manufacturing. After all, points out Rochat, "from an environmental point of view, it does not matter where the emissions are being reduced, so long as they are being reduced somewhere".

The good news is that environmental campaigners are far from ruling out emissions trading, at least in principle, although some remain cynical about the reasons behind the airline industry's enthusiasm. The main complaint, says Dyer at Friends of the Earth, is that it will simply take too long to implement.

This fear has some foundation. Australia, Japan and the UK already have voluntary emissions trading schemes, of which the last two include domestic aviation. BA has participated in the UK scheme for five years, and Sentance is enthusiastic, saying the carrier has targeted a 12.5% reduction in emissions over five years. Admittedly, this voluntary scheme comes with government financial incentives, whereas a genuine trading scheme would end up costing airlines money, but Sentance thinks it shows a way forward.

The EU scheme is also due to start in 2005, but this will only focus on "fixed" emitters such as industry and power generation. This is not surprising, as these are the easy wins in the emissions trading game, while transport is more problematic to measure and more controversial politically. Even with airlines campaigning to get in, changes to the scheme will not be considered till 2006, and 2008 is probably the earliest date airlines might join, even if the UK government does apply the pressure it promises on the issue during its presidency. All this is too long to be doing nothing, says Friends of the Earth.

A genuine international emissions trading scheme would also have to be agreed at ICAO level. Although the Committee on Aviation Environmental Protection (CAEP) was on the agenda of its February meeting, ahead of the ICAO Assembly in September, conclusive proposals seem unlikely to emerge. ICAO signalled in 2001 its support for an open emissions trading scheme, but as Le Thi Mai points out, views remain diverse, with the USA not even in the Kyoto Protocol to reduce greenhouse gases, and developing countries unwilling to see curbs on their growth. Sentance is a bit more optimistic, pointing to a growing consensus on the issue, but even he does not think a full and final agreement will be reached by the Assembly.

Besides, aviation cannot trade emissions with itself alone: it needs other industries to buy certificates from. An ICAO trading scheme can thus only work if there is a more generalised global trading scheme. However, with the lack of ratification for the Kyoto Protocol on climate change this seems unlikely.

That possibly leaves aviation with an even bigger challenge in the years ahead: how to persuade the public and the world at large that it is doing something, while its CO2 emissions continue to grow. In this context, the words of Dyer at Friends of the Earth are ominous. "I think we are at the early stages of people's awareness on this issue. People are starting to say it is crazy to be able to fly across Europe for £20. They are surprised how large the global warming impacts of aviation are."

Voluntary measures

How can such impressions be countered? Rochat's view is that airlines need to stress how small a percentage of global warming is caused by aviation, and to stress technological improvement and the various voluntary measures being taken by the industry. "We have to show that we are acting on this every day, that we are taking it very seriously," he says.

Ultimately, a better strategy, however, might be to tackle the issue that the environmentalists tend to shy away from, and look at people's reasons for flying. "If the whole society we live in encourages you to fly, airlines cannot be expected to tell people not to," says AEA's Le Thi Mai.

Hardeman thinks that the result of such a debate would be a realisation of how vital flying is to most people's lives. "I think it is a fair statement in general that aviation is widely supported by the public. It is definitely important for industry to continue to explain aviation's sustainable role in society and educate the wider public on this important issue," he says.


Source: Airline Business