THE EU EMISSIONS TRADING SYSTEMS (ETS)

Set up in 2005, the EU ETS (European Union Emissions Trading System) is the world’s first international emissions trading system. It is a type of carbon market, often referred to as a "cap-and-trade" system, which aims to reduce greenhouse gas emissions through market mechanisms.

Key elements of a cap-and-trade system:

• Cap: The "cap" in cap-and-trade refers to the total limit on greenhouse gases that can be emitted by all participating entities. In the case of the EU ETS, this includes around 11,000 heavy-energy-using installations in power generation, industry sectors and airlines operating between these countries. Each year, the EU lowers the cap slightly, meaning the total emissions from these sectors must reduce accordingly.

• Trade: Each participant (say, a power plant or airline) is allocated a certain number of carbon credits, where each credit represents the right to emit one tonne of CO2 (or the equivalent amount of different greenhouse gas). These allowances can be traded, meaning a company that reduces its emissions and doesn't need all its allowances can sell them to a company that is unable to reduce its emissions as quickly.

• Carbon price: The trading of allowances creates a carbon price, which is the cost per tonne of CO2 emitted. This price is a signal of the value of reducing emissionsthe higher the price, the greater the economic incentive for companies to cut their emissions.

The EU ETS is the largest carbon market in the world, but it's not the only one. There are several others, including the California Cap-and-Trade Program, the Regional Greenhouse Gas Initiative (RGGI) in the northeastern United States, and the Chinese national carbon market. Each of these operates similarly to the EU ETS, but with different caps, participants, and regulations.

Relevance to Aviation

Trading CO2 emissions from aviation is available in the EU ETS since 2012. Under the EU ETS, all airlines operating in Europe are required to monitor, report and verify their emissions, and to surrender allowances against those emissions.

The benefits of including aviation in the EU ETS:

• Encourages emission reduction: It incentivizes airlines to reduce their greenhouse gas emissions, as they can profit from selling unused credits.

• Global impact: As many airlines operate internationally, this means that the benefits of emission reductions can have a global impact, not just within the EU.

• Market-based solution: The system harnesses market mechanisms to drive environmental improvements, which can often be more efficient than command-andcontrol regulation.

Ryanair has been actively participating in the EU Emission Trading System (ETS) since 2012 as required by law. Initially, like many other airlines, Ryanair voiced concern over the EU ETS, primarily over fears of increased operational costs which would translate to higher airfares. The company expressed that the implementation of the system would give non-European airlines a competitive advantage.

To meet the EU ETS requirements, Ryanair has invested in newer, more fuel-efficient aircraft and has pursued a high-seat-density model, which spreads the emissions from each flight over a larger number of passengers. They have also invested in digital tools and carbon offsetting projects.

However, some environmental groups have criticised these efforts as inadequate, arguing that the only effective way to reduce emissions from aviation is to reduce the number of flights. In 2019, Ryanair, the Irish low-cost airline, became the first non-coal company to join the top ten list of EU's biggest carbon dioxide emitters, highlighting the significant emissions that can come from aviation.

Sustainable aviation fuels (SAF) represents a broad category of fuels derived from nonfossil sources, including advanced biofuels and e-fuels, offering a sustainable alternative to conventional jet fuel.

IATA estimates that SAF could contribute approximately 65% of the emissions reduction necessary for aviation to achieve its goal of reaching net zero CO2 emissions by 2050.

BIOFUELS (BAF)

Biofuels, also known as biojet or renewable jet fuel, are derived from biomass sources such as plant materials (vegetable oils, algae), animal waste, and certain sugars and starches. They can be produced using various conversion technologies.

Biofuels offer several benefits, including a significant reduction in greenhouse gas emissions compared to conventional fuels, utilisation of renewable feedstocks, and potential for waste and byproduct utilisation.

However, limitations include high production costs, limited availability of sustainable feedstocks, and lower energy density compared to conventional fuels. To be used in aviation, biofuels have strict compositional requirements that go beyond those for road transport fuels. Therefore, BAF is currently blended with fossil fuel-derived jet fuel which allows it to meet the needs of aviation fuel while reducing the overall carbon footprint of the fuel. (source)

Synthetic Fuels

Synthetic fuels, also known as e-fuels or electrofuels, are produced by combining captured carbon dioxide emissions with hydrogen derived from renewable energy sources like solar or wind power.

E-fuels offer advantages such as zero or low net carbon emissions when produced using renewable energy and the potential for carbon dioxide recycling. However, challenges include high production costs, energy-intensive production processes, and the need for large-scale infrastructure and investment.

Source: Inhabitat

The pros of SAF

1. Reduced greenhouse gas emissions: SAF can reduce CO2 emissions by up to 80% compared to conventional aviation fuels.

2. Renewable and sustainable: SAF does not compete with food crops or water supplies, nor does it contribute to forest degradation. Unlike fossil fuels, SAF can actually recycle CO2 that has been absorbed by the biomass used in the feedstock during its lifetime. (source)

3. Technological compatibility: SAF is a “drop-in” fuel which can be used on today's aircraft without modifications when blended with up to 50% conventional jet fuel.

4. Potential for waste and byproduct utilisation: BAF can be produced from waste materials, offering an opportunity for waste reduction and circular economy principles.

The cons of SAF

1. Production costs: At the moment, SAF is still more expensive compared to conventional fuels, hindering widespread adoption and scalability.

2. Feedstock availability: Sourcing sustainable feedstocks in sufficient quantities without competing with food crops or causing environmental harm is very challenging.

3. Energy density: SAF generally have lower energy density than conventional fuels, which can affect aircraft range and performance.

4. Scale and infrastructure: Scaling up SAF production and establishing the necessary infrastructure for production, distribution, and storage require substantial investment and coordination among stakeholders.

Book And Claim

Book and claim is a system for tracking the production and use of SAF. It allows airlines to purchase SAF credits from producers, verifying that the fuel has been produced sustainably. The credits can then be used to offset the emissions from their flights. This system provides a market-based incentive for the production and use of SAF and can help to accelerate the transition towards a more sustainable aviation industry.

The book and claim system also claims to boost the demand and supply of SAF, hence bringing down its exorbitant costs. Last year, Amex GBT partnered with oil bigwig Shell to launch the world’s first blockchain-powered platform called Avelia. The program offers around 1 million gallons of SAF, which will be certified according to the regulatory standards set by the country of delivery. Aon was the first customer to join Avelia.

• Learn more about Amex GBT’s Avelia program in our interview with Amex GBT’s Vice President of Global Sustainability, Nora Lovell Marchant.

Renewable Energy

Renewable energy refers to energy obtained from naturally replenishing sources that are abundant in nature, such as sunlight, wind, water, geothermal heat, and biomass. It is considered an important tool for achieving sustainable development and reducing greenhouse gas emissions.

Renewable energy technologies are rapidly advancing and becoming more cost-effective, making them increasingly competitive with traditional fossil fuels.

Aviation's green revolution

Airlines and airports around the world have been implementing various initiatives to reduce their environmental impact. Here are some interesting milestones:

• In 2011, KLM carried out the world’s first commercial flight partly powered by SAF made from used cooking oil.

• In 2012, Galapagos Ecological Airport (Ecuador) became the world's first environmentally sustainable terminal running solely on solar (35%) and wind power (65%), with 80% of its infrastructure made from recycled materials.

• In 2015, Cochin International Airport (India) became the world's first fully solarpowered airport in 2015. Its solar plant has more than 46,000 solar panels generating approximately 60,000 units of electricity daily.

• In 2022, Indianapolis International Airport (USA) worked with Canadian company Carbon Cure to lay a runway where the concrete has recycled CO2 injected into it.

• In late 2023, Virgin Atlantic aims to perform the first-ever transatlantic flight from London to New York using 100% SAF.

• Edmonton International Airport (Canada) is creating the largest airport-based solar farm in the world.

• Learn more about airports using renewable energy and reducing their carbon footprint, in our interview with Dubai Airport’s CEO, Paul Griffiths.