Carbon Trading Hits Airline Industry

The aviation industry is now facing direct actions to abate the growing effects of climate change. The implications for the industry are profound: fewer flights with more passengers, higher ticket prices to offset the costs of environmental pollution, and perhaps even a reduction in the size of the industry as a draconian step to limit air pollution.

With weaker carriers driven out of operations, the result could be a smaller but safer airline industry.

The latest environmental impact on aviation comes from the European Union (EU). Starting in January 2012, the EU is demanding all carriers that land or take off in the 27 nation block would emit no more than a set amount of carbon dioxide (CO2). Under the cap-and-trade concept, carriers can buy extra credits from each other if they exceed the limit, or they can sell credits if they emit less.

Transport contributes about 13% to global CO2 emissions, of which aviation involves a 13% share

Transport contributes about 13% to global CO2 emissions, of which aviation involves a 13% share

The cap for 2012 is set at 212.9 million tons of CO2 – about 3% less than the average emitted by the airlines between 2004 and 2006. In 2013, the cap will drop another 2% — to around 208 million tons of CO2 – remaining at this level until 2020.

According to the EU, aircraft CO2 emissions account for only 3% of the global total but they have increased by 87% since 1990. Moreover, the real impact on global warming is amplified 2 to 4 times because airliners flying at high altitude leave condensation trails which add to the greenhouse effect.

Contrails contribute to the greenhouse effect

Contrails contribute to the greenhouse effect

The EU estimates the cost of the program at $10 to $15 per ticket. The European airline industry warned earlier this year that it would have to spend over $65 billion between 2011 and 2022 buying up credits from more fuel-efficient industries to meet the aviation quotas.

The EU’s carbon trading plan will only exempt airplanes with CO2 emissions that add up to 10,000 tons annually. Thus, a B777 airliner flying from Shanghai to London, a distance of approximately 5,500 miles, will emit 222 tons of CO2. If the airliner has three flights to Europe each week, the exemption quota will be used up in three weeks.

International flights represent approximately 62% of global aviation's fuel consumption

International flights represent approximately 62% of global aviation's fuel consumption

Airlines from non-EU member states flying to or from Europe will be affected by the law.

“This is already adopted legislation and we are not backing down,” declared Isaac Valero-Ladron, an EU spokesman. “We knew what we were doing in 2008 when we adopted this and we are not changing our legislation.”

The EU has banned some carriers deemed unsafe from landing in Europe; now the same is to be applied to airliners that emit too much greenhouse gases.

London's Heathrow Airport is the biggest single source of air pollution in Western Europe, aggravated by an average of more than 50 take off's and landings each hour

London's Heathrow Airport is the biggest single source of air pollution in Western Europe, aggravated by an average of more than 50 take off's and landings each hour

The EU mandate reflects frustration with the International Civil Aviation Organization (ICAO), which has studied the environmental effects for years but has not come up with a mandatory program. Rather, ICAO has developed voluntary goals for leveling aviation’s total emissions by 2020 and halving them by 2050. The ICAO plan artfully side steps the voluntary nature of its intentions:

“The ICAO Program of Action on International Aviation and Climate Change, agreed in 2009 … is the first and only globally-harmonized agreement from a sector on a goal and on measures to address CO2 emissions. ICAO continues to pursue even more ambitious goals for aviation’s contribution to climate change.”

Noble and toothless rhetoric.

In Europe, other energy-hungry industries have been under a cap-and-trade system since 2005; the exemption for aviation stood out.

Even though the EU program could be seen as an eventuality five years ago, only now are airlines and industry representatives outside the EU really making their complaints noted. The Chinese government has threatened to review its contracts for the purchase of Airbus airliners if the emissions caps are applied to Chinese airlines flying to EU states.

The U.S. Government has not yet weighed in, but the U.S. Air Transport Association (ATA), representing the vast majority of U.S. airlines flying to Europe, asserts the emissions cap-and-trade is illegal.

“Our position is that the EU ETS [Emissions Trading System] as applied to U.S. airlines is contrary to international law and bad policy,” claimed ATA’s Nancy Young.

ATA, American Airlines, United and Continental Airlines have taken their case to the European Court of Justice. Hearings were held this week and the judges are expected to issue a ruling by winter.

EU airlines insist that if they have to join the carbon trading market, their U.S. competitors should be forced to jump in as well. The European carriers say if they must spend $65 billion buying carbon credits over the next 15 years, and non-EU airlines are not forced to do the same, it would amount to a massive tax on European aviation.

On the safety side, if airlines are forced to retire their old fuel guzzlers, the new airplanes that replace them are safer. There could be a net safety benefit.

On the other hand, if peak oil has been passed or is about to be, the cost of travelling by air is likely to go up far more than it may under the emissions limiting scheme. A radar plot of airplanes flying to/from North America-Europe shows over 600 airplane symbols crowded over the Atlantic in a 24-hour period. That number could shrink by 200 or more if fuel prices air travel out of the reach of casual tourists.

The controversy over the EU cap-and-trade policy has spawned numerous comments on the Internet. Herewith, some of that commentary:

 

“I fail to see how carbon trading decreases emissions. I’m not a big fan of this system, as it still allows for people to continue to belch out as much pollution as before; they just have to buy credits from someone else.”

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“It is well known that the impact of CO2 by airlines is greater than the same amount of CO2 by other means of transport because the airline exhaust is in the upper atmosphere whereas car exhaust is easily absorbed by the vegetation.

“It is environmentally illogical to exclude air transport. It will make flight more competitive compared to car or train and the CO2/passenger km is worse than for any other type of transport. Hence, excluding air transport will result in a negative effect in the end. Including air transport in the system is only a step to bring the different means of transport on the same level.”

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“In the 1960s and 1970s some cars got maybe 7 mpg. With little government laws and many other big factors today for Chevrolet 7 out of 17 models get 30+ mpg. No model (other than trucks) gets lower than 20 highway mpg. Now imagine if Europe and the U.S. required Airbus, Boeing and others to have a similar increase in efficiency and maybe also somehow helping the airlines change to these newer, hopefully better planes. This would affect the entire market, reducing prices for customers and increasing business for the air industry.”

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“To work any such system has to include any flight in and out of the EU. Otherwise you might get a situation where a plane starts in Greece and does not fly directly to Spain, but makes a short landing in North Africa and then continues to Spain just to declare the flight as ‘not within the UE’ and avoid the carbon tax. That way, you would have made the flight even worse than before … If the flight to Africa and from Africa are treated as flights in the EU, there is no incentive to ‘cheat’.”

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“A general CO2 tax would be the first transnational tax in history.”

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“You want a better way than a cap-and-trade system? How about a carbon tax on jet fuel and all other fossil fuels? Surely a carbon tax is more efficient and equitable than a cap-and-trade, and a lot easier to manage as well. And you don’t even have to get in an [argument] with head-in-the-sand Americans to make it work. That is, unless they don’t plan on refueling in Europe once they land.”

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“As some have observed, yes, the cost of carbon credits will be passed on to the passenger. That’s the whole point!

“People will travel less, or rather shorter distances, when price goes up. More CO2 efficient means of travel can better compete with less efficient ones. Train may be preferred over plane or car. All this will cut emissions, which is the central objective.

“Europeans will go less to the U.S. as Americans go less to Europe; tourism will change to the home market. As a whole, I don’t think tourism on either continent will suffer …

“The carbon trade system is brilliant in that it allows countries to earn credits by investing in CO2 efficient tech [which] will be employed where the effect is greatest.”

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“The so-called market approach will not, and cannot, solve airline emissions for a very simple reason: operating an airliner imposes a cost on the environment that the airline doesn’t have to pay! Since the airline can stick the rest of society/the world with the cost of its operation, there is no market incentive for it to curb emissions. Claiming that regular market incentives to reduce fuel consumption (to lower costs the airline DOES have to bear) amount to ‘dealing with’ the emissions problem is disingenuous because, again, the cost of the fuel paid by the airline does not include the cost its use imposes on everyone else in the form of environmental damage. The best way to factor in that cost is with a carbon tax. Cap and trade is just a way to spread the pain equally among participants in the industry being regulated.”

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“Operating those B767s and B757s on transatlantic routes is about to become more expensive.”

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“It is hardly a development that is hostile to the aircraft design and construction industries.”

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“It’s pretty simple: no EU airline can avoid this tax. It will apply, without exception. on 100% of heir flights as, obviously, 100% of their flights come to, from or through the EU …

“The same won’t be true of, say, a U.S. airline, which may only have 3-4% of their flights coming in our out of the EU and thus will only be subject to this tax on a tiny portion of their network …

“3-4%. 100%. The difference is huge.”

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“Microsoft took the view that the EU would back down. It looks like costing them $690 million in fines. It’s a high risk strategy unless you can play Brussels politics really well.”

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“When the U.S. introduced anti-terrorism regulations, they forced the entire industry to comply or else lose the ability to land in the States. Why wouldn’t the EU do the same for global warming?”