The Carbon Footprint - Emerging Environmental Challenges for Sustainable Aviation

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The Carbon Footprint Emerging Environmental Challenges for Sustainable Aviation Dr. Michael W. Tretheway InterVISTAS Consulting Inc.

strategic transportation & tourism solutions

2009 AAAE/FAA Forecast Conference 1 April 2009


Will Anyone Care ? strategic transportation & tourism solutions


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Spiritual Messaging "Making selfish choices such as flying on holiday or buying a large car are a symptom of sin.” – "Sin is not just a restricted list of moral mistakes. It is living a life turned in on itself where people ignore the consequences of their actions." • Richard Chartres Bishop of London

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Sophisticated Messaging on Roads & Rail Routes to LHR 6


Coming Soon to North America Climate Change issue is not confined to Europe – North American attitudes are shifting rapidly – Aviation will be targeted

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The Carbon Footprint strategic transportation & tourism solutions


Historic EU GHG Emissions ƒ EU GHGE grew by 87% (1990 and 2004)

Development of EU-25 international aviation GHG emissions

ƒ Emissions from other sectors declined. Source: Commission of the European Communities, Summary of the Impact Assessment: Inclusion of Aviation in the EU Greenhouse Gas Emissions Trading Scheme (EU ETS), December 2006.

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Some Good News – Efficiency Gains 0.9

CAGR : -1.9%

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

0.0 1980

CO2 Emissions per Passenger Mile - Pounds

US Domestic Aviation CO2 Emissions per Passenger Mile 1980 – 2004

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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However, Rapid Growth in Air Travel US Domestic Air Travel 1980 - 2004 700

Passenger Miles (Billions)

600

500

4.0% : R CAG

400

300

200

100

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

1980

0

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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Total Emissions Continue to Climb‌ US Domestic Aviation CO2 Emissions 1980 - 2004 Total CO2 Emissions - Billions of Pounds

400 350

2.0% : R G A C

300 250 200 150 100 50

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

1980

0

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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How Does this Compare to Auto?

US CO2 Annualized Growth Rates 1980 - 2004

Air Travel

Automobile /Motorcycle

Emissions per Passenger Mile

-1.9%

-0.9%

Passenger Miles

4.0%

1.2%

Total Emissions

2.0%

0.3%

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007

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Technology is Not Enough A study by the Intergovernmental Panel on Climate Change (IPCC) concluded that

“the increase in aviation emissions attributable to a growing demand for air travel would not be fully offset by reductions in emissions achieved through technological improvements alone” Source: US General Accounting Office, “Aviation and the Environment: Aviation’s Effects on the Global Atmosphere Are Potentially Significant and Expected to Grow” 14


What About Increasing Load Factors? US Domestic Average Load Factors 1980 - 2004 80 70

Load Factor (%)

60 50 40 30 20 10

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

1980

0

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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However, Decline in Average Number of Seats US Domestic Average Seats per Aircraft 1980 - 2004 150

CAGR: -0.8

%

Seats per Aircraft

125

100

75

50

25

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

1980

0

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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Minimal Effect on Average Number of Passengers per Aircraft… US Domestic Seats Occupied per Aircraft 1980 – 2004 100

CAGR: 0.2%

Seats Occupied per Aircraft

90 80 70 60 50 40 30 20 10

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1985

1980

0

Year

Source: US Bureau of Transportation Statistics National Transportation Statistics 2007.

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The Future – A Larger Share of a Larger Pie US CO2 Emissions 2005 vs. 2030

Aviation

~ 4%

2005

~ 5.5%

Aviation

2030

– Aviation emissions will increase 65% by 2030 – Total emissions will increase by 25% by 2030 Source: Energy Information Administration

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Solutions strategic transportation & tourism solutions


Solutions Do Nothing – but public sentiment is changing – there will be a political solution imposed on industry

Carbon Tax Cap and Trade Voluntary Offsets

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Carbon Tax An economist’s dream – charge users what it would cost to offset carbon – but no requirement to actually offset

Tax Revenues – would generate substantial tax revenues • domestic aviation in Canada: $120 million ?

– tax neutrality (e.g., BC) • reduce other taxes paid • but imposes burden on aviation

– multiple jurisdictions may dually tax emissions 21


Carbon Tax Stable, known cost – cap and trade schemes • may have escalating or variable costs • may be based on erroneous calculations

total payment varies with business cycle

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Cap & Trade Imposes limit on emissions – limit typically declines, in order to meet Kyoto targets

Administration – Cap/quota imposed on an industry – cap allocated to firms

If you cannot stay within quota – then you must buy quota from another firm in another sector – e.g., new pulp & paper plant reduces emissions by more than its quota, so sell excess reduction to airline 23


Cap & Trade May raise cost of travel – investment to achieve cap • although in many sectors, these investments are cost reducing

– purchase of quota

May be prone to error – initial industry quota – allocation of quota – inequitable quota assignment • e.g., ‘free’ quota to new entrants • This will look like slots

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Cap & Trade ƒ Strongly preferred by environmentalists – achieves actual reductions

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Examples from the EU Cap & Trade – The EU plans to add aviation to its Emissions Trading Scheme (ETS) starting in 2011

Carbon Tax – Starting in 2009, the UK is replacing air passenger duty with a “per flight” tax based on carbon emissions

Note the double ‘solution’

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Voluntary Carbon Offsets CO2 emissions countered by financial contributions to: – Energy efficiency projects – Renewable energy projects – Tree planting (considered suspect offset)

Voluntary offsets will mitigate negative economic impacts of GHGE reductions – Most price sensitive will not volunteer

Carbon offsetting provides a viable “transition strategy” – until more permanent solutions are available

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Carbon Offset Sales, 1991 to 2006

© Copyright 2007, Stefan Gössling et al, Journal of Sustainable Tourism Vol. 15, No. 3

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Price Impact on Air Travel Less than you might think – air travel is thought of as ‘price elastic’ • 10% price increase typically reduces travel by 13%

– but when price increase affects all routes, carriers, destinations and modes • air travel is observed to be price inelastic • 10% price increase reduces travel by only 6% 29


Price Impact When all carriers and modes affected – e.g., fuel cost increase or carbon tax

Then 10% increase in fares reduces travel by only 6%

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Forecasting Issues Carbon Impacts will have to be managed – Thus, a need to forecast carbon footprint

Will need to project – Traffic movements by type of aircraft – Phase in of fleet replacement • And deployment of new technologies (737/A320 replacement in 2016?)

– Changes in operational procedures 31


Carbon Forecast Global Aircraft Emission Projections Hypothetical Scenario

Traffic Growth @4% pa

3.00

2.50

Offsets

Offset reduction effect Effect ETS Normal emission reduction

1.50

797/A360 Y3 aircraft

"Normal Emission Reduction per RPK

1.00

remaining emissions 737/A320 replacement Widebody replacement

0.50

Remaining Carbon 20 33

20 32

20 31

20 30

20 29

20 28

20 27

20 26

20 25

20 24

20 23

20 22

20 21

20 20

20 19

20 18

20 17

20 16

20 15

20 14

20 13

20 12

20 11

20 10

20 09

-

20 08

Index (2008-1.0)

2.00

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Thank You strategic transportation & tourism solutions

www.InterVISTAS.com


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